Governor Brown’s Tax Hike: Who’s Paying and How Much?


Last Monday, Governor Edmund G. Brown, Jr. released a revised budget for the State of California. Initially, Governor Brown had estimated a $9.2 billion budget shortfall for 2012-13, but this sum increased to $15.7 billion “as a result of a reduced revenue outlook, higher costs to fund schools, and decisions by the federal government and courts to block budget cuts.” To bridge the gap, the Governor is proposing to “increase[] the personal income tax on the state’s wealthiest taxpayers for seven years and increase[] the sales tax by one-quarter percent for four years.”

Currently, the California personal income tax rate is capped at 9.30%. Under The Schools and Local Public Safety Protection Act of 2012, the tax rate will increase as follows.


OverBut not OverTax is
$500,000And over11.3%


OverBut not OverTax is
$1,000,000And over11.3%

Head of Household

OverBut not OverTax is
$680,000And over11.3%

In reality, the state personal income tax rate is even higher because the above rates do not include the existing millionaire tax imposed under the Mental Health Services Act. Now, which neighborhoods will be most affected if Governor Brown’s initiative is passed? To answer this, consider the 2011 Personal Income Tax Statistics from the Franchise Tax Board.

CommunityReturnsAGI ($000)Tax Liab ($000)AGI/Return
City of Industry (91716)1324,2252,3271,863,461.54
Atherton (94027)3,3253,327,600311,8981,000,781.95
San Francisco (94119)695681,77350,346980,968.35
South Pasadena (91031)556394,01638,299708,661.87
Los Angeles (90067)3,3212,063,047198,027621,212.59
Beverly Hills (90209)553342,69933,714619,708.86
San Diego (92186)106,124453612,400.00
Fountain Valley (92728)521304,26429,258584,000.00
San Francisco (94111)2,6701,371,921117,722513,828.09
Palo Alto (94304)1,785899,13970,677503,719.33
Portola Valley (94028)3,4431,580,110131,490458,934.07
Beverly Hills (90210)10,3734,710,612430,194454,122.43
Santa Monica (90411)251109,2149,307435,115.54
Los Altos (94023)455186,07816,508408,962.64
Ross (94957)1,144436,65540,682381,691.43
Newport Coast (92657)4,6811,751,588151,964374,190.98
Los Altos (94022)9,4443,452,708286,538365,598.05
Pope Valley (94567)28497,3508,377342,781.69
Palo Alto (94301)8,5152,881,461233,110338,398.24
Diablo (94528)548177,04814,874323,080.29
Encino (91436)8,9732,878,893247,384320,839.52
Newport Beach (92658)1,387442,22735,767318,837.06
Rancho Santa Fe (92067)5,6741,784,631183,846314,527.85
Pacific Palisades (90272)11,0213,443,915284,952312,486.62
Redlands (92375)666198,10212,847297,450.45
Santa Monica (90402)5,7861,700,920140,960293,971.66
Beverly Hills (90212)8,1022,373,166221,178292,911.13
Belvedere Tiburon (94920)6,2521,823,960153,321291,740.24
Los Gatos (95030)6,4191,808,747148,861281,780.18
San Juan Capistrano (92693)35496,2118,520271,782.49
Los Angeles (90077)4,2981,153,146109,848268,298.28
Los Angeles (90071)578154,37315,446267,081.31
Santa Barbara (93150)506132,78611,902262,422.92
San Francisco (94104)1,264330,24726,243261,271.36
Los Angeles (90049)19,2024,963,913405,742258,510.21
Los Altos (94024)10,5092,661,766204,472253,284.42

Any surprises? I was not expecting to see the City of Industry at the top of the list. In communities with few returns, a few outliers could distort the average adjusted gross income (AGI) per return. Here’s the data for the other side:

CommunityReturnsAGI ($000)Tax Liab ($000)AGI/Return
San Francisco (94159)290-2,179854-7,513.79
Stanton (90680)12,217-109,3419,547-8,949.91
San Diego (92137)99-896175-9,050.51
Bakersfield (93390)634-6,5541,955-10,337.54
Tres Pinos (95075)303-3,192858-10,534.65
Modesto (95352)455-7,5801,011-16,659.34
Bakersfield (93303)234-6,8611,686-29,320.51
Bakersfield (93383)126-3,97183-31,515.87
Guasti (91743)148-5,484318-37,054.05
Helm (93627)115-4,31773-37,539.13
Tipton (93272)1,298-112,7611,445-86,872.88
Concord (94522)321-39,031540-121,591.90
Upland (91785)702-138,0951,798-196,716.52
North Hollywood (91616)34-13,144105-386,588.24

I still don’t quite understand how an entire community can end up with a cumulative negative AGI. So, more money was lost than earned. However, someone in these communities made money since there was an overall tax liability.

As for the sales tax bump, a/k/a Out-of-State Retail Sales Incentive Act, at some point, sales tax hikes will end up being counter-productive as the spread between in-state and out-of-state sales prices continues to widen and lures more people to shop online. I guess the governor is confident that we have not reached that stage yet.