CALIFORNIANS TAKE A HEAVY HIT IN WALLET.

Byline: Stephen Kroes

HOW much of your income do you pay to support your local, state, and federal governments? Ten percent? Twenty percent? Forty percent? If you live in California, your answer is probably close to that last number. And if you live in the Los Angeles area or in other high-cost areas of the state, you may be paying even more.

According to the latest figures that allow state-to-state comparisons, Californians paid an average of 35.5 percent of their incomes in taxes and fees to support local, state and federal governments in 1992-93. The largest part of that burden is federal taxes. We pay an average of 14.2 percent of income to support California's state and local governments.

Is this a high tax burden? Advocates for higher taxes and bigger government say it is not and point to other states ranking above California on this measure of tax burden. They've got it wrong.

Sure, if you look at a simple ranking of all states' taxes and fees as a percent of income, California appears to be near the middle - 23rd highest. But the rankings by themselves don't tell the whole story.

California is a high-income state, ranking 11th in per-capita personal income. Look at other high-income states, and you'll find that almost all rank very low in tax burden as a percent of income.

Why is that? When personal income and population density are high, the costs of providing government services and infrastructure can be spread over many people and a large income base, allowing a given level of government to be provided at low cost per dollar of income.

The low-income states, however, must cover some of the same basic costs with fewer taxpayers, and those taxpayers have lower incomes. Those states are forced to push the limits of their tax bases merely to provide schools, highways, jails, modest health and welfare services, and other elements of a basic level of government.

My homeowners association provides an example of this phenomenon. I live in a small condominium complex, and unfortunately, that means my association dues are high, because the association must cover the costs of maintaining a pool, driveways, landscaping and saving up for a new roof with only 20 homeowners.

If I lived in a larger complex, the dues would be much lower because those costs would be spread among a larger membership base. Am I receiving better services because I'm paying more than someone in a larger complex? No.

But the government spending lobby, assuming that greater cost equals greater benefit, argues that California is not taxing its residents enough because Californians contribute a lower share of our incomes to government than taxpayers in places like North Dakota, Iowa, Utah, Idaho, Louisiana, and South Carolina (states with low incomes).

To use the spending lobby's reasoning, someone living in a larger condominium complex should pay higher dues just because I do.

Because of the underlying differences in tax base, it is misleading to simply compare California's tax burden with all the other 49 states. California is in a different league.

To get an apples-to-apples comparison, California should be compared to states that have high per-capita incomes. Making that comparison with the 10 highest-income states shows California third highest - exceeded only by New York and Hawaii.

In fact, most of the other comparable states rank very low in tax burden as a percentage of income. Massachusetts, notorious for high taxes, ranks 38th on the national list and seventh on the Top 10 high-income list. Does anybody consider Massachusetts a low-tax state? Yet they rank far below California in this measure of tax burden.

Grouping the high-income states together shows that, for a high-income state, California's state and local governments are exacting a high tax burden.

Yes, you say, but didn't we taxpayers save a bundle after passing Proposition 13 in 1978? We cut our property taxes in half and limited the growth of taxes, right?

Then we required local governments to ask voters before raising taxes, didn't we? Haven't these policies lowered our tax burden? That depends on what you want to call a tax.

It is true that taxes (if you define the term tax strictly) were cut and have remained lower than the levels of the 1970s, as a percent of Californians' incomes. But as those restrictions were placed on government, inventive people in government figured ways around them. Fees, assessments, and other revenues have grown steadily since the late 1970s to replace the taxes that were reduced.

In fact, fees and assessments are now a larger revenue source than any single tax, including the property tax, income tax, or sales tax. Fees and assessments are also the fastest growing revenue, far eclipsing growth in major taxes in recent years.

Counting all revenues generated locally or by the state, California governments take the same percentage - in excess of 16 percent - of Californians' personal income as they did in the 1970s. The difference is that fees and other impositions are a greater share of the total and taxes are a lesser share than they were in the pre-Proposition-13 1970s. The burden is still high; it's just collected differently.

What does all this mean to someone living in Southern California? Southern California is an expensive place to live. Home prices and other costs are high, and incomes are necessarily higher to try to match the high living costs. With those high incomes come higher income tax brackets and - you guessed it - a higher tax burden.

If you can afford a median home in the Los Angeles area, you probably make over $70,000 a year in family income. According to Franchise Tax Board statistics, taxpayers earning over $70,000 represent about 20 percent of all joint (married) taxpayers in Los Angeles County, yet they pay over 70 percent of the income tax collected from all residents of the county.

California has a very progressive tax system. That means the higher your income, the higher your tax burden. You are not just paying a higher tax bill in actual dollars, but a higher percentage of your income is set aside to pay taxes.

So, when you look at rankings that show California's average tax burden statewide, recognize that you are probably paying much more than the statewide average.

Indeed, a study by the District of Columbia Department of Finance and Revenue focuses on tax burden in Los Angeles as part of a comparison of burdens in the largest cities of each state. Los Angeles turns out to be somewhat of a bargain, tax-wise, if your family income is $25,000, ranking 43rd highest in the nation.

But if your family income is $75,000, your state and local taxes rank 16th highest. In fact, Los Angeles ranks second highest on that study's progressivity index, which measures the disparity between tax burden at high incomes vs. tax burden at low incomes.

Why all this fuss over ``tax burden''? Because decision-makers are allowing those with a vested interest in government to use the statistics against taxpayers.

When political leaders propose tax changes to try to make California more competitive for new jobs, lobbyists for government spending inundate the state Capitol with tax burden statistics, attempting to prove that our burden is not high.

Instead of relief, they call for increases in taxes. Those lobbyists are usually funded by those who exist on our tax dollars - public employee unions, local governments, and other agencies.

Let's get the facts straight and stop the government spending lobby's distortion.

MEMO: Stephen Kroes is the director of research for the California Taxpayers' Association.

CAPTION(S):

Box

Box: Tax Burden for a Family of Four in Los Angeles

Source: ` `Tax Rates and Tax Burdens in the District of Columbia: A Nationwide Comparison,'' June 1996