Democrats in the California state legislature today proposed a tax walking on the state’s highest earners to assist spend for schools and services injured by the pandemic.
The proposition would raise taxes on California millionaires, and lead to a top tax rate of almost 54% for federal and state taxes for the highest earners.
The plan follows proposals in New york city-state to raise taxes on the wealthy to pay for a widening spending plan deficit.
A proposal to raise taxes on California millionaires would lead to a leading tax rate of nearly 54% for federal and state taxes.
Democrats in the California state legislature this week proposed a tax hike on the state’s highest earners to help pay for schools and services injured by the pandemic. Legislators state the tax hike would raise over $6 billion a year and would reroute funding from the rich to those who have been struck hardest by the Covid-19 crisis.
The plan follows proposals in New york city-state to raise taxes on the rich to spend for a widening budget deficit. And it contributes to a growing argument over expanding inequality during the pandemic and who needs to pay the skyrocketing expenses to the government.
Yet the California proposition would raise the greatest state tax rate in the country even higher, and restore the possibility of wealthy Californians getting away the state.
California’s leading marginal tax rate is 13.3%. The brand-new proposition would add 3 new surcharges on seven-figure earners. It would include a 1% additional charge to gross earnings of more than $1 million, 3% on income over $2 million, and 3.5% on earnings above $5 million.
So the leading tax rate would be 16.8%, on earnings of more than $5 million and the combined state and federal tax rate for California’s leading earners would skyrocket to 53.8%. With the reduction on state and regional taxes capped at $10,000 under the Trump tax cuts, the top-earning Californians wouldn’t have the ability to subtract the new taxes from their federal returns.
The tax would only affect the leading 0.5% of California taxpayers. But that little group of super-earners– many of them in tech– pay 40% of the state’s tax earnings, according to the state’s Franchise Tax Board. The brand-new tax rate would also apply to capital gains, which accounts for a large share of tech earnings, considering that California taxes capital gains at the same rates as common earnings.
With lots of tech companies now enabling executives to work remotely for the next year, top earners could more easily leave the state and work in states with no earnings tax, like Nevada and Texas. If the brand-new tax is approved in August, it would be retroactive for this year used to income earned because January 2020.
“The tax hikes would be the tipping point for many taxpayers,” stated Robert Gutierrez, president of the California Taxpayers Association, which advocates lower taxes, “triggering them to schedule a one-way journey to one of the 49 states with lower taxes.”