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Rancho Cordova Independent

Reparations Would Cost Taxpayers $2.8 Trillion

Mar 13, 2024 10:00AM ● By Pacific Research Institute News Release

SACRAMENTO, CA (MPG) – A new analysis released February 20th by the Pacific Research Institute – a California-based, nonpartisan, free-market think tank – finds that if California were to implement the controversial recommendations of the state Reparations Task Force, it would cost taxpayers $2.8 trillion, push 1.84 million additional people to leave California over 5 years, and increase the tax burden for the average household by 54 percent.

“As lawmakers consider the first bills to implement the state Reparation Task Force’s recommendations, it is imperative that they understand the fiscal and economic implications,” said Dr. Wayne Winegarden, PRI senior fellow in business and economics. “Our new analysis makes clear – the state reparations plan is a financially unrealistic proposal that will bankrupt California if enacted.”

Spending Watch is a new initiative from the Pacific Research Institute evaluating the revenue, spending, and economic impacts of major budget and policy proposals.

Reviewing U.S. Census estimates, nonpartisan media analyses, and the California Reparations Report from the state Reparations Task Force, it is estimated that roughly 2 million black Californians would be eligible for the Commission’s recommended $1.4 million per person payout.  Given this, Spending Watch pegs the total state reparations bill at $2.8 trillion.

Assuming that reparations are paid out over 30 years, and that the present-day value of $1.4 million is not accounted for over that period, the annual state cost would be $93.3 billion.

Given these calculations and assumptions, Spending Watch estimates that Californians would experience the following if lawmakers enact the state Reparations Task Force’s proposals:

54 Percent Increase in State Tax Burden: Since lawmakers are unlikely to significantly reduce spending, Spending Watch calculates that a 3.25 percentage point increase in income, sales, and corporate income tax rates would be needed to generate sufficient revenue to fund reparations payouts.  This equates to a more than 54 percent increase in the marginal state income tax and sales tax burden for the average household.

Jobs, Economy, Household Income Would Decline: Spending Watch estimates that, compared to California’s baseline growth, reparations payouts would cause the economy in 2029 to be 11 percent smaller and the average family’s income to be 5.7 percent lower.  There would also be 4.9 percent fewer job opportunities.

Would Accelerate State’s Outmigration Problem: Given the negative economic and tax effects, Spending Watch estimates that an additional 1.8 million residents would leave the state over a five-year period due to reparations, seeking a more affordable lifestyle in other states.

“Unlike reparations, there are many policies that lawmakers can enact to create prosperity and improve affordability for all – such as repealing AB 5 to increase employment opportunities, implementing school choice, and reforming CEQA to lower housing costs – without imposing huge burdens on the poorest residents who are least able to bear the costs,” Winegarden concluded.

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