Student Occupy protesters owe a debt to California’s 1 percent

It’s difficult to divine exactly what the Occupy demonstrators in California cities and on university campuses are protesting.

The former appear to be denouncing the greed of the “1 percent” — those with the highest incomes — while the latter are opposing fee increases that university boards are imposing to compensate for reductions in state appropriations.

Whatever the underlying rationales may be, the media have lumped both varieties together, and issues have been subordinated to verbal clashes over occupation tactics and official responses, some of which have been needlessly violent.

If there is a connection, at least in California, between the on- and off-campus occupations, it’s to be found in tax system dynamics. And it’s less a connection than a dichotomy.

The off-campus protesters, apparently, are incensed that those sitting atop the economic pyramid enjoy so much of the bounty.

In California, according to the most recent Franchise Tax Board data (2009), those with adjusted gross incomes of $1 million or more — just 34,000 tax returns out of 14.6 million — had 11.8 percent of the $881 billion total.

That may sound outrageous to some, but as recession gripped the economy in the past few years, the number of top-drawer taxpayers and their incomes dropped sharply — by more than 27 percent just from 2008 to 2009, for example, far more than any other income category.

We needn’t weep for the wealthy; they can take care of themselves. But their incomes are much more volatile than those of us who earn paychecks, because they are much more dependent on capital gains from stocks and other investments, and when recession hits, their income streams decline sharply.

That’s where the effect on college fees comes into the equation.

California has a particularly progressive personal income tax system, which means that it’s extraordinarily dependent on high-income taxpayers.

In fact, the top 1 percent of taxpayers generate about half of the state’s income taxes, and income taxes constitute about 60 percent of the state’s general-fund revenues.

When incomes of those at the top decline, state income tax revenues take a beating and the state budget gets squeezed, forcing governors and legislators to either reduce spending or engage in funny-money financing.

And college and university appropriations are one of the few areas of the budget not protected by constitutional provisions — such as K-12 school aid — or subject to federal law.

Logically, therefore, those campus demonstrators should be hoping for the much-despised 1 percenters to enjoy big increases in their taxable incomes so higher education appropriations could be increased and fees could decline.

Somehow, one doubts that will occur.

Dan Walters’ Sacramento Bee columns on state politics are syndicated by the Scripps Howard News Service.

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