When Governor Newsom endorsed Prop 15 in September – which voters soundly rejected in November – he specifically said “In a global, mobile economy, now is not the time for the kind of state tax increases on income we saw proposed at the end of this legislative session and I will not sign such proposals into law.”
It seems legislators have already forgotten Governor Newsom’s sentiment on new taxes. On December 7th the 2021-22 legislative session began and new tax bills were immediately unveiled. AB 71 (Rivas and Chiu) was introduced and aims to create a $2.4 billion homeless fund. The spot bill leaves a breadcrumb trail to potential funding sources which includes increasing personal income tax rates on incomes over $1 million, increasing the corporate income tax “to historical rates,” imposing a more progressive corporate income tax, eliminating or limiting corporate tax loopholes including the water’s-edge election, and “marking to market unrealized capital gains and the repeal of stepped-up in basis of inherited assets.”
AB 65 (Low) was introduced and seeks to provide Californians with a Universal Basic Income. The spot bill doesn’t identify how a UBI would be funded, however, Assemblymember Low’s AB 2712 from the last legislative session sought to fund a UBI by potentially raising corporate taxes, creating a value-added tax on goods and services, or implementing a services tax.
ACA 1’s (Aguiar-Curry) reintroduction also induces a sense of déjà vu since its 2019 unveiling. The bill seeks to reduce the voter threshold needed to pass local sales and parcel taxes if the revenue will be used for public infrastructure or affordable housing. Constitutionally, such measures currently require a 2/3 vote to pass and ACA 1 aims to reduce the threshold to 55%.
Recent news reporting California’s corporate exodus seems to give credence to Governor Newsom’s September statements. HP Enterprise, Oracle, and Charles Schwab have defected for Texas. Palantir is moving to Colorado while Tesla and Space X are establishing production facilities in Texas. This is on the heels of companies like McKesson, Toyota North America, Jamba Juice and Kubota Tractor Corporation leaving the state, among many others.
Thus, it seems the advice bears repeating; now is not the time for state tax increases on employers.