On TV and in a recent parents’ guide, we mentioned a new website, TaxBalloon.com.
Created by Voice of San Diego member, entrepreneur and feisty libertarian Michael Robertson, the site purports to help you simply see what all of the tax increases scheduled or proposed would mean for your household.
But there are some problems with it and, if we examine them, we can get a good understanding of some of the complexities of these issues.
I was excited about the site because I’m often frustrated by the lack of what I’d call pan-jurisdictional leadership and analysis. In other words, we often treat each level of government as its own island.
But we don’t just live in the city of San Diego or San Diego Unified School District.
We live in a City Council district. We live in a school district. We live in a city, a county, a state and a nation. Leaders of each of those agencies may want to argue only about what they control, but we need to understand it all as a whole.
So what’s the problem with TaxBalloon.com?
For one, it assumes that all the federal tax cuts scheduled to expire will expire in coming months. I doubt this will happen, but yes, it’s the law on the books, so that makes sense.
Secondly, though, and this is a bigger problem, TaxBalloon.com assumes that both Proposition 30 and Proposition 38 pass on the state level. The number it tells you about what you’ll pay in higher taxes adds them both together.
But that assumption is an impossibility. If both propositions somehow get more than 50 percent of the vote (which is unlikely), then the one with the most votes prevails.
Let’s review quickly:
• Proposition 30: Will raise income taxes on those earning more than $250,000 and it will raise the sales tax a quarter cent on every dollar you spend on goods and services that are taxable.
• Proposition 38: Will raise income taxes on almost all levels of income.
• Proposition Z: Will raise property taxes $60 per every $100,000 of assessed value of property you own.
The state Constitution would not let both income tax hikes pass. TaxBalloon.com assumes that will happen.
So TaxBalloon.com’s number, especially for those making more than $250,000, is wildly off. Robertson agrees: “misleading for those making 250k+ but I checked logs and 0.002 have entered 250k+.”
After I pointed this out to him on Twitter, Robertson agreed to add a footnote. Here’s the disclaimer he put at the bottom of the page:
This means for those households making $250,000+ TaxBalloon will overstate your tax obligation. For those making less than $250,000 TaxBalloon is correct unless Proposition 30 receives more votes than Proposition 38 in which case you should subtract the Proposition 30 tax increase from your total.
You’ll notice, though, if you put your info in, it still estimates a tax you’ll pay on Proposition 30 even if Proposition 38 gets more votes and even if you make less than $250,000.
So what’s going on here?
Robertson and his team assumed that the average person would spend 30 percent of their gross income on taxable goods and services. But for many days, it was also doubling the amount you’d have to pay.
Why? Robertson had assumed Proposition 30’s sales tax increase was a half cent, not a quarter cent.
He agreed it was erroneous after I pointed it out in Twitter and he changed that too.
But Robertson says you can still assume that, if somehow Proposition 38 gets more votes than Proposition 30, and they both get more than 50 percent, then the sales tax in Proposition 30 will go up.
That’s also not clear. As Kevin Yamamura from the Sacramento Bee put it in a tweet to me:
“Open question that courts would decide. Many think tax plans trump in entirety, others say sales tax could survive,” he wrote.
John Myers, the well-known Sacramento reporter, agreed, calling this scenario a “messy legal fight.”
If you want to dig further, here’s the attorney general’s analysis (Page 3). She says that if Proposition 38 passes and does better than Proposition 30, the sales tax in Proposition 30 would not go into effect:
Proposition 38 contains a section indicating that its provisions would prevail and the tax rate provisions of any other measure affecting sales or PIT rates—in this case Proposition 30—would not go into effect.
Robertson and I ended our Twitter exchange cordially. “We’re adding a footnote to [TaxBalloon.com] and fixing sales tax calculation. Thanks for the input!” he wrote.
You’re welcome! I’m not trying to pick on him. As I said, the exploration helped me understand Propositions 30, 38 and other aspects better.
There’s one final note: The site tells you to consider your home’s value and that will help it tell you what would happen if Proposition Z, the school construction bond in San Diego, passes.
If you do that, remember to use your assessed value, not what you think your home would sell for if you put it on the market. Look at your property tax bill for the taxable value, as that is a number more closely associated to what your home was worth when you bought it rather than what it might be worth if you tried to sell it now.
I’m Scott Lewis, the CEO of voiceofsandiego.org. Please contact me if you’d like at scott.lewis@voiceofsandiego.org or 619.325.0527 and follow me on Twitter (it’s a blast!):
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Disclosure: Voice of San Diego members and supporters may be mentioned or have a stake in the stories we cover. For a complete list of our contributors, click here.