Hilton unveils flat-tax plan in Huntington Beach

HUNTINGTON BEACH, Calif. (KESQ) - Republican gubernatorial candidate Steve Hilton unveiled a flat state income tax plan today in Huntington Beach.   

Hilton's plan would eliminate state income taxes for families earning $150,000 and less annually and then apply an 8% across-the-board income tax for earnings above that.  

Hilton said his plan would collect about $187 billion. The state's 2026-27 budget is $355.9 billion and last fiscal year the state collected about $130 billion in income taxes.

"Something really outrageous just happened in Sacramento,'' Hilton said at a news conference Tuesday at Laird Coatings, which makes coatings for plastic manufacturers, with workers behind him.

"The corrupt system that Xavier Becerra is part of and supports just increased taxes again... They are taking more money from working people's pockets... The simplest and most direct way we can put more money in people's pockets is to take less money out in the first place."

An effort to reach the campaign of the former U.S. Health and Human\ Services secretary was not immediately successful.   

Hilton claimed his plan would save $551 for families with an annual income of $50,000; $1,271 for families that make $75,000; $2,385 for families that make $100,000, and $5,855 for families that make $150,000.

Families making $200,000 annually would save $7,329.   

The state relies on a progressive tax system that is adjusted according to income.

Chapman University economics professor Raymond Sfeir said that even if Hilton had the votes to change the tax system in Sacramento he would then be tasked with finding cuts in the budget to pay for his plan.

Hilton did not offer specifics on how he would find savings, saying he was confident he could find enough waste to pay for the decrease in revenue.   

"What expenditures is the state going to cut -- that's almost one- third of the budget,'' Sfeir said. "The political costs would be really tremendous. What departments would be eliminated altogether."  

"In California we've gotten used to very high expenses of government by Sacramento so if they want to do that they would have to think about at what cost before you do it."  

Sfeir said that a tax system in which families making $160,000 would be paying the same as millionaires might be a difficult sell for some Californians.

"Many people would have an issue with this,'' Sfeir said.

Hilton could make up for the difference by hiking other fees and raising taxes on real estate, for example.  

If sales taxes were increased to cover the difference the rate cut from income could end up costing the working poor more, Sfeir acknowledged.   

"It is difficult to change the tax system,'' Sfeir said. "One has to take so many things into consideration."

An increase in sales taxes could also affect consumer habits with some families cutting back on spending for some goods, Sfeir said. And that could hurt businesses, he added.   

"The behavior changes when you change the tax system,'' he said. ``It could have a very large impact on how people change their consumption.''   

The issue with a progressive tax system, however, is when loopholes allow the wealthy to get breaks, Sfeir said.