California’s cost of living is hurting the middle class
■ By Jon Coupal / Contributed
Perhaps the most contentious issue on the November ballot is Proposition 6, which would repeal the massive increase in both California’s gas tax and the car tax. Proposition 6 was placed on the ballot by a grassroots coalition of taxpayers and small business groups. It is opposed by well-financed interests including labor organizations, construction companies and other interests that make money from transportation projects.
Those interests are financing a multi-million-dollar disinformation campaign claiming that the state’s roads and bridges are unsafe because Californians’ taxes were too low.
It would be funny if it wasn’t so expensive.
Highest taxes in the nation
The reasons that Proposition 6 is so popular — despite the irresponsible and self-serving claims of its opponents – are legion. California already had the fifth-highest gas taxes in the nation, even before the tax hike. Our state income tax rates and state sales tax rate are the nation’s highest. Add to that crushing regulations and counterproductive progressive policies that result in outcomes opposite of that intended and it’s easy to understand why California is suffering from a massive outflow of citizens to other states.
That exodus to Texas, Arizona, Nevada and other states is being driven by a singular powerful force — cost of living. Few Californians are unaware of how expensive it is to live here relative to other states. Despite a rapidly growing national economy, many citizens here still feel left behind, and for good reason. California’s poverty rate is 20.6 percent, the highest in the nation, when the cost of living is taken into account. In a recent poll, 47 percent of Californians considered themselves “working poor.”
Rising cost of living: a result of tax hikes
In the debate over Proposition 6, opponents understate the impact on the cost of living that results from these tax hikes. A recent study by the California Policy Center exposes just how punishing last year’s tax increases are for middle-class Californians and why they should be repealed.
According to the analysis, the gas tax and car tax hikes will impose on an average two-car family at least $1,500 in taxes a year. When adjusting for the “average” tax rate, a two-car “average” family must earn almost $2,000 in pre-tax earnings just to pay their California car and gas taxes. Obviously, this isn’t chump change.
The news for low-income families is even worse. A typical two-car low-income family may pay $1,800 in taxes a year. Because low-income families are in a lower tax bracket, that two-car low-income family still must earn almost $2,000 in pre-tax earnings just to pay their California car and gas taxes.
According to the study, using the most conservative modeling, the latest gas tax and car tax hikes alone will force a family of four to pay anywhere between roughly $650 and $800 more in tax and living expenses – depending on commute and consumption of goods and services impacted by fuel prices. The breakdown is as follows:
Car and Gas Tax Hikes: $521.25 to $620.50.
Food Purchases: $124.28.
All other Purchases: Additional costs are variable, but undeniably a higher cost of living.
The working family’s sacrifice
While the study documents the direct tax and increased food costs from the gas and car tax hikes, indirect cost-of-living increases will most certainly be felt as the cost of fuel and vehicle registration increases with these taxes and the additional costs are passed on by businesses to their customers in the form of higher prices.
The bottom line is that the cost-of-living increases resulting from the new gas and car tax hikes will require sacrifices from working families. In fact, it almost wipes out what the average family spends on Christmas each year ($935.58) – according to the National Retail Federation.
Californians can prevent the tax-raising Grinches from taking away what they would spend on the holidays by voting yes on Proposition 6 to repeal the gas and car tax hikes.
Jon Coupal is president of the Howard Jarvis Taxpayers Association