With More to Spend, O.C. Residents Also Pay More State Taxes : Bankruptcy: They are among the state’s most heavily taxed, yet may be asked to vote themselves a sales-tax increase.

Rich Holland thinks Orange County residents are taxed to the brink. “The tax burden is always on my mind, and I’m thinking of relocating because of it,” said Holland, 39, who lives in Aliso Viejo and edits an outdoors publication.

John Cazier of Corona Del Mar thinks the opposite. “Orange County is taxed moderately. It’s on the lower end of the scale,” the retired business executive said, adding that paying higher fees is the least residents can do to help the county out of bankruptcy.

That is just what county Chief Executive Officer William J. Popejoy has proposed: a half-cent sales tax increase to help mend the fiscal crisis.

The recommendation--which county supervisors must decide whether to put before voters--has intensified debate over just how much of the burden of digging out should fall on ordinary citizens and whether Orange County residents are already overtaxed.

An analysis by The Times shows that Orange County’s tax bite is among the highest in the state--and significantly more than that in neighboring counties.

The average Orange County resident paid $2,422--10% of his or her income--in state and local taxes in 1992, the latest year for which figures are available on property, sales and personal income taxes, motor vehicle registration and other fees.

That compared to a statewide average of $2,026 per capita in state and local taxes, or 9.61% of residents’ income, putting Orange County second only to Santa Clara County among the state’s eight biggest counties.

Many factors account for that heavy load. One is the progressive nature of the state income tax system: Orange County residents pay more because they earn more. Property taxes are higher because homes are more expensive and because much of the construction in the county is newer, meaning there are more special district fees.

While the sales tax rate in Orange County has been lower than that in Los Angeles County--and lower than the statewide average--county residents have paid more in sales taxes per capita because they buy more.

“We’ve made shopping such an art form here,” said Mark Baldassare, chairman of UC Irvine’s Urban and Regional Planning Department, citing the county’s posh retail centers and its image as a mecca for mall-goers.

Senate President Pro-Tem Bill Lockyer (D-Hayward) recently instructed his staff to study Orange County’s tax situation. The results of that review, too, show that local citizens indeed pay more than residents of most other California counties. But they also earn more, leaving them, on average, with more disposal income even after paying their higher taxes.

A separate analysis conducted for The Times by the Tax Foundation in Washington, D.C., found Orange County’s total tax burden to be nearly 20% higher than the national average, though lower than places such as King County (Seattle), Wash., and Nassau County, N.Y.

The Tax Foundation’s study was based on 1994 estimates of all federal, state and local taxes and user fees, including excise, utility and corporate income taxes.

Last week, a survey of county residents conducted by Field Research Corp. for Charles Schwab & Co. found that a majority favored raising the sales tax--for up to two years--if the new revenues benefitted schools or law enforcement. Popejoy’s plan would boost the tax rate for 10 years, with the county getting the revenues.

Baldassare said he has never seen an analysis of the county’s tax burden but believes perceptions cut both ways.

“I think there truly is a lot of confusion about how our tax burden compares with other areas’,” he said. “If Orange County residents hear that they are paying more than elsewhere in the state, their first reaction is to say, ‘Do we really need to pay more?’ So they’re going to be more skeptical.”

Outside of Orange County, analysts say, the perception is decidedly skewed toward the view that county residents don’t pay as much as they should, given their wealth. That bias may be particularly strong in Sacramento, where Gov. Pete Wilson and several legislators have indicated that the county is rich enough to solve its fiscal problems without state aid.

Certainly there is no dispute about Orange County’s relative wealth. Its income per capita of $24,200 in 1992 was the sixth highest among the 58 counties in California and the highest in Southern California--about $3,000 more than in Los Angeles County. But that also means Orange County bears a proportionately higher state income tax burden.

Is that fair? When is a tax burden too high?

Sherry Bebitch Jeffe, a senior associate at the Center for Politics and Economics at Claremont Graduate School, said the data provide some objective comparisons but do not address the question of fairness, which has more to do with ideology and politics than with economics.

Holland of Aliso Viejo, a community of 20,000 in south Orange County, has never calculated his tax burden. But he took one look at his property tax bill and concluded, “I’m taxed extremely high.”

Holland and his family paid about $3,500 in property tax this year for their three-bedroom condominium, or about 2% of the assessed value of the 5-year-old home.

That’s double the 1% property tax rate that was mandated by the passage of Proposition 13 in 1978. How so? The Hollands pay more because they live in a newish community indebted for tens of millions of dollars in Mello-Roos fees, which are paid by residents on top of their property taxes to finance infrastructure.

Because of the preponderance of Mello-Roos and other special assessments--such as fees for schools and lighting, which are tacked on property bills--Orange County’s effective property tax rate is higher than that in Los Angeles County, according to the State Board of Equalization.

And Orange County’s relative newness also means there are proportionately more properties assessed at current market prices than in older areas such as Los Angeles, census data confirm. As a result, for 1992 the property tax paid per capita in Orange County was $737, or 3.05% of per capita income. That compared to $568, or 2.67%, for Los Angeles.

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Orange County Supervisor Marian Bergeson said she has always thought her constituents were heavily taxed.

That the county carries a heavy load, she said, is in itself bad enough. But what it gets back from the state for operating revenue, she said, is disproportionately small.

That is true largely because of Prop. 13 and Orange County’s fiscally conservative attitudes. Historically, the county assessed property at low values. When Prop. 13 passed in 1978, the landmark measure not only prohibited counties from raising property taxes, but also locked in what county governments got back from the state based on pre-Prop. 13 rates.

For the 1993-94 fiscal year, Orange County got back for general operating revenue 5.7% of the property taxes assessed to its residents. That was the lowest among all of the state’s 58 counties, which averaged a property tax return rate of 20%.

“Orange County is being penalized because it was more frugal before Prop. 13,” said Jeff Reynolds, chief of research at the State Board of Equalization in Sacramento.

The county also gets less back from state sales taxes--the principal reason being that it has very few unincorporated areas, where a chunk of the sales taxes and hotel taxes collected go straight to the county, rather than a city coffer.

Orange County officials have estimated that a half-cent sales tax increase would bring in about $137 million annually, which could be used to back about $1 billion in new bonds for refinancing the county’s debt. It would take a vote of four of the five county supervisors to put the proposal before voters, and then would require simple majority approval.

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A Big Tax Bite

Even without a proposed half-cent increase in the sales tax, Orange County residents carry one of the state’s heaviest loads when their property, state income and sales taxes per capita are figured as a percentage of personal income. Rankings of the state’s largest counties--those with at least 1 million residents--based on figures for 1992, the latest year for complete recent data is available:

Property Tax Assessment % of personal County per capita income Riverside $588 3.37 Orange 737 3.05 San Bernardino 495 3.02 Santa Clara 749 2.93 San Diego 577 2.86 Alameda 624 2.71 Los Angeles 568 2.67 Sacramento 460 2.32 Statewide Average 595 2.82

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State Income Tax Assessment % of personal County per capita income Santa Clara $790 3.09 Orange 613 2.53 Los Angeles 507 2.39 Alameda 533 2.36 San Diego 399 1.98 Sacramento 390 1.97 San Bernardino 258 1.57 Riverside 271 1.55 Statewide 508 2.41

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Sales Tax Tax rate Assessment % of personal County (1992) per capita income Santa Clara 8.25% $959 3.75 Alameda 8.25 832 3.68 Sacramento 7.75 710 3.58 San Bernardino 7.75 564 3.43 Orange 7.75 812 3.36 Los Angeles 8.25 675 3.17 Riverside 7.75 547 3.14 San Diego 7.75 629 3.12 Statewide 7.91 686 3.26

Sources: State Board of Equalization, controller’s office, Franchise Tax Board, Department of Finance, U.S. Department of Commerce

Researched by DON LEE/Los Angeles Times

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Carrying a Heavy Load

Orange County’s state and local tax burden is among the biggest of the state’s eight largest counties. In 1992, the most recent year for which complete information is available, local residents paid a dime in taxes for every dollar of income per capita.

State, Local Taxes

Income State, county taxes % of income County per capita per capita* per capita Santa Clara $25,550 $2,759 10.8 Alameda 22,605 2,332 10.3 Orange 24,199 2,422 10.0 San Bernardino 16,420 1,564 9.5 Riverside 17,431 1,650 9.5 Los Angeles 21,259 1,976 9.3 San Diego 20,144 1,833 9.1 Sacramento 19,833 1,779 9.0 Statewide 21,072 2,026 9.6

* Includes property, sales and personal income taxes, motor vehicle registration and major county user fees; excludes cigarette, fuel and alcoholic beverage taxes.

Sources: Tax Foundation; state departments of finance, motor vehicles; controller’s office; Board of Equalization; Franchise Tax Board; U.S. Department of Commerce

Researched by DON LEE / Los Angeles Times