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Stealth taxes

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In 1978, Proposition 13 placed limits on property tax increases in California and also invoked some controls for passage of new tax measures. Principal controls for new local tax measures include requiring a 50%-plus-1 vote for general tax measures and a two-thirds-plus-1 vote for tax measures designated for a specific purpose.

In actuality some taxes which California residents pay have not met these requirements. For example some tax measures (like a defeated local county measure) have been designated as a general tax measure while being promoted as being intended to provide funding for a specific purpose. This is not an uncommon stealth tax practice although it does not insure that .the stated funding intent will be met.

A more routine stealth tax practice in California is to pass a new tax at the state level with a two-thirds vote of the state legislature thus avoiding any potential for defeating the tax by individual votes of all residents. A good example is SB1, passed by the legislature in 2017. As a result every July 1, from now to eternity, the gas tax will go up in California. And, the legislators can honestly say they did not vote for it — this year. The July 2021 hike added another 6 cents to the existing state gasoline tax for a total of 51.1 cents per gallon. That’s 21 cents higher than Californians paid just four years ago.

Another example of a state stealth tax is the states ability to designate the title for the measure on the state ballot. A good example being the recent passage of Proposition 19. titled as "The Home Protection for Seniors." While seniors who wish to move within the state may find some benefits, their children will no longer inherit the Proposition 13 value or, “Prop 13 basis” as had been California law for nearly 25 years. In most cases this means they probably will not be able to pay the new "stealth" property taxes and must sell the home they grew up in and inherited.

I consider inflation, to be the most costly stealth tax of my lifetime. Consider these facts;

California's progressive income tax has several tax brackets where rates rise based on income. Subsequent income increases due to inflation can then push taxpayers into higher tax brackets, without any increase in real income.

Recently annual inflation has averaged above 5 percent each year, Effectively, this means paying more tax in real terms without any accompanying legislation. Inflation becomes a tax on the money that people currently hold in their wallets and pocketbooks. When the government prints money to finance its deficit, the costs of all goods and services will rise while real income does not. We are all currently experiencing this.

If the amount of money is growing faster than the economy, the money will be worth less. That is what happened when Germany abandoned the gold standard and decided to fund the costs of the First World War by borrowing. When Germany lost the war, attempts to print enough money to pay the war debts resulted in their printed "money" becoming worthless.

Jack Gray, Director

Napa County Taxpayers Association

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