Investing in California’s Future: Tax Fairness and the State Budget February

Economic Downturn “Great Recession” (Officially, Dec 2007 – June 2009) Financial & housing market collapses main cause of downturn CA unemployment still at 12.5%, U.S. 9.4% Economy is expected to grow slowly in 2011 and pick up momentum in

Absent Permanent Solutions, CA State Deficits Will Persist for Years General Fund (In Billions) 3

School Funding (2008 Averages) 4 Quality Counts 2011 &

Proposition 98 The Constitutional Guarantee Compared to Actual Funding 5

Impact of Cuts on Higher Education Layoffs of faculty and staff Fewer classes and support services Increased tuition and fees for student – more than 250% for CSU and UC Takes longer for students to graduate 6

Education Spending is Not the Problem 7

Who Pays, Who Benefits And Who Decides? 8

Who Pays Taxes in CA? Bottom income 20% pay 11.1% of income in taxes Top 1% pay 7.8% of income in taxes 9 California Budget Project, Who Pays Taxes in California? April 2010

California General Fund Revenue Sources: 53% from personal income tax 10.2% from corporate income tax 30.4% from sales & use tax 6.4% other revenue & loans 10 LAO Estimates

Small Business Portion of Taxes Small business pays a very small share of corporate income tax – The 2% of corporations w/ taxable incomes of $1M or more paid 87% of the 2007 corporate income tax 11

Cost of Funding State Services has Shifted… Cost of funding state services has shifted from corporate to personal income tax payers 12

Property Taxes in CA Proposition 13 Limits property tax rate Reassessed at sale Resulted in funding for schools, cities & counties shifting to the state Business loophole Unfairly “subsidizes” big corporations who can use complicated ownership changes to avoid reassessment (worth $5B annually) and changes who pays taxes in CA. 13

Who Benefits? Taxes are our collective investment in a safe, civilized, and prosperous society. Public at-large –P–Public services (police, fire, public education) –I–Infrastructure (roads, railroad, air traffic) –S–Safety net programs (social services, health care for poor kids, seniors) 14

Corporate Profits, Personal Income & Median Wages 15

Income in the US: Incomes at the bottom were rising faster than those at the top. 16 Bottom going up faster than top 5%

Income in the US: Average income of the top 5% of families was 10.9 times as large as the bottom 20% Times 73% Increase! Bottom 20% 4.1% decrease in real income!

Wealth in US Richest 1% own 33.8% Richest 10% own 71.5% Poorest 50% own 2.5% 18 Half of the nation owns less than 3% of the wealth

Tax Fairness Goals: Adequate Funding for All Schools and Colleges Stable and Reliable Funding Equitable State Tax Structure that Promotes Fairness 19

Who Decides? 20 Educate yourself about taxation in California and how to fund schools in the 21 st century. And then pass the information along. California Budget Project EdSource Public Policy Institute of CA CA Tax Reform Assn YOU!