How to Tax

By Bob Gerecke

The State of California experiences significant revenue fluctuations because it relies heavily on taxes paid by the wealthy, but the amount of those taxes is not stable, is dependent upon the ups and downs of the economy, leaving the state with periods when revenue does not meet needs.  How should that roller-coaster effect be flattened out?  Bob Gerecke rejects a prominent solution and offers a much more just set of measures.

California state legislators are being urged to reduce taxes on the capital gains of the wealthy, and to expand the sales tax instead, in order to reduce fluctuations in the state's revenue.

Reduce taxes on the 1%?  No Way!  The 1% already own and continue to pocket the lion's share of everyone else's hard work.

Instead, to reduce the volatility of state income:

            1. Require the 1% to pay tax on their average profits over perhaps the last 3 years, thereby smoothing the annual fluctuations.
 
            2. Increase the property tax on the top 1% of real properties (mansions and the biggest agricultural and commercial properties), whose value fluctuates less than profits do.
 
While we're reforming taxes, stop taxing the middle class on the total value of their homes.  Tax them on their equity, the portion they really own.  Tax the bank on the rest, because it really owns the rest.  During a slump in real estate values, a homeowner's equity shrinks to little or nothing if there's still a big mortgage, and it may take years to recover, so their tax should drop or disappear, thereby reducing their financial distress from the recession.
 
If we need more revenue to fund public services, tax other forms of wealth (such as securities) held by the 1%, besides their real estate.  Now we tax the value of the middle class's major asset - the home - but not the major asset of the 1% - the portfolio.