[arshneet]

Is it true that the super-rich pay higher tax rates? My understanding is most of them have great accountants, and the salaries they pay themselves are generally very low. They use loopholes (intentional or unintentional by the government) to avoid the high income tax rates. Which is why I find the whole fantasy around raising income tax rates to tax the rich to be a smokescreen, and not very well researched. It'd hardly affect the super-rich. The top 1% will mostly be salaried people who can't use the loopholes.

[rmk]

CA has a capital gains tax, also an AMT. And it's generally not possible to escape much of CA taxes (most SV founders/CEOs anticipating a big payday shift domicile to FL and similar tax-free jurisdictions for this reason).

The state also extended the eye-wateringly high top tax bracket for another decade or so, I think... Even with all that, with this year's debacle, CA has probably blown through its rainy-day surplus and then some.

The numbers do not lie. CA taxes the high-earners and rich quite heavily (to practically Scandinavian levels).

[arshneet]

I don't understand CA's taxation as much, except the income taxes are very high with little in terms of actual quality of life improvements. I do understand Canadian and UK taxation somewhat and most rich people don't pay themselves a high salary. There are "City of London" loopholes people can use to form a company and not pay tax. There's another one in the UK, where income not sourced inside the UK isn't tax, and that can be used in creative ways. Which means you can form a company in a tax haven and move your revenues there. In Canada, the corporate tax rate is like 15% and goes down to 9% for small business. And of course there are other avenues through which people form charities for tax avoidance and what not that I haven't dug deeper into. A lot of companies in the US also use the double Irish (closed now) and other similar schemes, don't they? I might not know as much here, so would love to know more. I highly doubt millionaires and billionaires pay 50%+ tax rates anywhere. They would be using loopholes I think. Kind of why I believe income tax is for the most part a failed scheme if you want to tax the rich. Tiered sales taxes might actually achieve more fair taxation.

[rmk]

CA is a first-world country (comparable), whose politics and governance are closer to a third-world populist state (India comes to mind). Insane giveaways and voter-mandated initiatives that take budgetary decisions out of elected representatives' hands (this one is both too much democracy and too little democracy at the same time!)

As far as taxing people effectively is concerned, I do not think there are simple answers to be found. As you yourself know, it's possible to clean dirty money simply by setting up complicated ownership structures in jurisdictions such as Jersey. But that only works for the substantially rich. The large majority of high-earners who are very successful professionals at or near the top of their fields end up shouldering a lot of the burden as far as income taxes are concerned. These people can not afford the advice needed to shelter their assets, so they end up getting caught in every revenue raising scheme.

High sales taxes are a terrible idea. CA taxes sales heavily (no VAT, but very high relative to other states), but it ends up being heavily anti-poor, because most poor are the working poor, and they must spend the majority of their incomes on essentials such as food, shelter and transportation. The sky-high gas taxes and surcharges also affect the poor the most in a similar fashion. If the goal of the taxation system is to be progressive, then sales taxes are the direct opposite of that. As are payroll taxes, for the most part.