Holding the line against new taxes will improve California’s economic future

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In summary

Significant tax increases proposed by the Legislature would make California less competitive when seeking to attract jobs and investment.

By Robert Gutierrez

Robert Gutierrez is President and CEO of CalTax, the California Taxpayers Association, [email protected]. He is co-chair of Californians Against Higher Taxes.

Allan Zaremberg, special at CalMatters

Allan Zaremberg is President and CEO of CalChamber, the California Chamber of Commerce, [email protected]. He is co-chair of Californians Against Higher Taxes.

Proposing tax increases is not something new or uncommon for members of the California legislature. Each year, state lawmakers introduce a myriad of bills to increase taxes and fees on individuals, businesses, and consumer products.

What is new, however, is that prominent figures have started to leave the state, citing the state’s burden of gold on wealthy businesses and individuals who pay the vast majority of taxes collected by the state. State. And they are not wrong. Californians, especially businesses and high net worth individuals, continue to pay some of the highest taxes in the country.

A recent publication by the California Tax Foundation indicated that the richest 5% of earners pay 67.2% of the state’s total tax revenue, an increase from 66.6% two years earlier.

As for businesses, they pay more than two-thirds of the total property tax burden, at 67.05% during the 2019-2020 assessment period, while owners accounted for the remaining 32.95%. The change reflects an increase of almost 4% from just two years earlier, and is nearly 9 percentage points more than in 1978 when California voters approved the proposed property tax reform initiative. 13.

This data, along with recent budget projections from the California Department of Finance showing that state revenues are $ 16.7 billion higher than the governor’s projections earlier this year, plus the $ 22 billion in reserves and the roughly $ 26 billion expected in federal COVID-19 relief, let it be clear that California does not need new taxes.

Fortunately, Governor Gavin Newsom has indicated that we will not be supporting tax increases this year. Many others in the State Capitol have also understood that wealthy individuals and businesses already contribute a disproportionate share of our state’s tax and property revenues, and that keeping it in California is vital.

Despite all of this, some members of the legislature continue to champion a wide range of significant tax increases.

One of those measures is Assembly Bill 71, which would raise taxes by $ 2.4 billion a year on California businesses and residents – a tax hike that would make California even less competitive. when it seeks to attract jobs and investment.

In addition, a group of lawmakers have proposed a union-backed personal income tax increase for top earners in California, with a maximum rate of up to 16.8%. The proposal, Assembly Bill 1253, provides for a 1% surtax on taxable income over $ 1.18 million, a 3% surtax on income over $ 2.36 million and a 3.5% surtax on revenues over $ 5.9 million – all on top of the existing $ 13.3 million. % tax. Such a tax increase would continue to drive high income people out of the state and take with them the income they contribute to the general fund.

This measure proposes a significant annual tax increase for businesses and California residents.

The income tax hike would hit many small businesses and entrepreneurs as well, as many pay corporate taxes as part of the personal income tax structure.

Another major tax increase has been proposed in the form of Assembly Bill 310 and Assembly Constitutional Amendment 8, together calling for a new 1% tax on equity above $ 50million. dollars and a 1.5% tax on net worth over $ 1 billion. . It would cost taxpayers an additional $ 22.3 billion per year in new taxes – at least until the targeted taxpayers pack their bags and move to one of the 49 states that don’t impose this type of flawed tax.

Unlike AB 1253, the “wealth tax” proposal requires voter approval and would be on the 2022 ballot, where Californians could protect our state’s fiscal health by firmly rejecting it.

California needs a strong focus on retaining and attracting new investment. How we keep our line against new taxes this year and into the future will be a major factor in dictating California’s economic future.


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