During the 20th Century, California grew rich off of manufacturing, with a strong emphasis on defense contracting. Yet the economy that was built during the 1950s built a strong middle class of moderately skilled workers. That economy built the California Master Plan during the Pat Brown era. We built and planned for a knowledge based economy that bloomed in the bubbles at the end of the century, but the burden was shared by all and the benefit was likewise a shared benefit.
Fast-forward to today, and the dividing lines between the rich and the poor are growing ever more stark. A new report from the California Budget Project (PDF) shows the rich getting richer and everybody else getting less:
New data from the Franchise Tax Board show that California’s income gaps continue to widen as the share of adjusted gross income (AGI) going to the wealthiest personal income taxpayers rises and the share going to middle-income taxpayers falls.1 The latest data, which predate the current recession, show that the gap between the wealthiest 1 percent of taxpayers and those with incomes in the middle of the distribution increased between 2006 and 2007, refl ecting a longer-term pattern of widening inequality. The new data also provide further evidence that the economic expansion of this decade failed to benefi t most Californians. While economic growth helped to more than triple total corporate profi ts between 2000 and 2007, total AGI rose only modestly, and the increase in AGI was concentrated among the wealthiest California taxpayers.
It is to the point that the top 20% of the state earns 75% of the state’s income. Conversely, the bottom 60% of the state earns less than 9% of the state’s income.
And these numbers are only getting worse. While the top quarter’s income rose at a 4.2% clip, the bottom fifth’s income went down by 2.7%. Meanwhile the growth of corporate incomes in the state shot up by over 250% in the housing inspired bubble era of 2000-2007 while personal incomes went up by barely a tenth of that. And yet, we can’t even consider revoking the corporate tax cut put into effect in February, huh Republicans?
Yet despite these very real facts, California has only one tax bracket between $49,999 and $999,999, 9.3%. Despite the fact that people at either ends of the spectrum are in vastly differing economic conditions, we charge them the same rate. Combine that with the additional deductions the rich pull down from the state, and you end up with a higher effective tax rate at $50K than you do at $500K or $999K.
California has been made unfriendly not through its taxation policy towards the rich, but towards the middle class. With our ever shrinking budgets, will there even be a middle class in California when the economy returns?
This graph shows the share of income increases going to different income groups.
So if we had two people, who last year made $50 and $100, respectively; and this year, they made $75 and $140, respectively; then you could say that, out of the total increase in income ($65), almost two-thirds went to the rich guy. However, it’s also equally true that the income of the poorer guy went up 50%, while the rich guy’s went up only 40%. And the ratio between their incomes, which was 2 to 1 before, is now only 1.87 to 1.
I strongly expect that, if you got the RIGHT graph — either the percentage by which each group’s income increased, or the ratio between median income and the per-person income in each group before and after the change — it would, in fact, reflect that the wealthy have been expropriating the productivity gains of the middle and working classes. But this graph isn’t great support for that argument.