Senate Democrats Praise Budget Raising Taxes on California Businesses

“Senate Democrats praise budget raising taxes on California businesses.” This is our headline.

Here is how Senate Democrats spin their tax increase on California businesses:

“Senate Leader Atkins, Budget Chair Skinner praise responsible budget plan to protect California progress, economy.”

Raising taxes on California businesses is not “responsible,” as businesses are the employers, and already pay a colossal amount of taxes in California. The Cal Chamber calculated Democrats proposal to raise taxes on California businesses will be by “$6 billion with an unprecedented 24% increase in the corporate tax rate.”

Sen. Nancy Skinner (D-Berkeley), “on Wednesday called for a tax increase on major corporations, such as Coca Cola and Walmart, in order to fund middle- and lower-income tax cuts as well as critical infrastructure projects in the 2023-24 budget,” the Sacramento Bee reported.

Evil Coca Cola and Walmart.

Let’s look at some of the larger businesses in California which will be hit with Sen. Skinner’s “responsible budget plan.” These are the employers. When Democrats raise taxes again on the employers, costs will go up, lower wages will be frozen or go down, and/or these employers will have to cut back and employees will be out looking for other work.

Here is a smattering of businesses with the most employees headquartered in California:

• Safeway
• Wells Fargo
• Alphabet
• Ross Stores
• CISCO
• Chipotle Mexican Grill
• Dignity Health
• Vons
• Panda Express
• Applebees
• Petco
• 99 Cents Only Stores
• Raley’s Family of Fine Stores, Inc.
• Genentech
• LA Fitness

All of the businesses above employ 10,000 or more, up to Wells Fargo Capital II which employs 274,000 workers. Ross Stores employs 88,000; Vons markets employ 44,000; Applebees has 28,000 employees; Petco has 24,000 employees; Raleys employs 14,000.

When California’s Democrat politicians push tax increases on these businesses, the results actually reduce wages for lower-skilled, young and female workers, according to the Tax Foundation. “The economic evidence suggests that in the long run, workers and consumers, rather than shareholders, bear a sizable share of the corporate tax burden.”

They also say a 1 percentage point increase in the corporate tax rate increases retail prices by 0.17%.

”The effects on prices were strongest for products that were more likely to be purchased by low-income households, indicating that corporate tax is likely less progressive than commonly asserted,” the Tax Foundation reports.

“The tax increase proposed today by Senate Democrats is unnecessary because of the prudent build-up of the rainy-day fund,” California Chamber of Commerce President and CEO Jennifer Barrera said. “Increasing taxes will send the wrong signals to job creators and investors in the state’s economy. Now is not the time to test California’s ability to withstand the impact of an economic downturn or a recession by placing our economic success at risk.”

Indeed.

Here’s how Sen. Nancy Skinner from Berkeley explains the tax increase on California’s employers:

The Senate’s “Protect our Progress” budget plan builds on Governor Newsom’s January proposed budget and serves as a starting point for negotiations with the Assembly and the Governor’s administration. The plan includes $26 billion in solutions and builds total reserves to $38.1 billion.

Among other highlights, the plan provides over $4 billion in tax relief with a 25 percent cut to taxes for small businesses and tax cuts for renters and workers, provides over $3 billion in new ongoing funding for schools and community colleges, $1 billion in ongoing local homelessness reduction funding, and over $1 billion to increase access to child care.

Under the “Protect Our Progress” budget plan, over 99 percent of businesses (more than 1.6 million tax filers) will have their taxes reduced by 25 percent by lowering the current flat corporate tax rate of 8.84% to 6.63% on the first $1.5 million of taxable income.

In addition, about 2,500 of the biggest corporations (just 0.2 percent of all business filers), which have received a 14-percentage point drop in federal tax rates – from 35 percent to 21 percent –  will have this reduction partially reversed at the state level, going from 8.84 percent to 10.99 percent on net income over $1.5 million.

Skinner’s tax increase on the larger employers will pay for:

• “tax cuts for renters and workers,” who already don’t pay nearly as much as property/home owners and middle class employees;
• $3 billion in new ongoing funding for schools and community colleges – which already are funded in the state budget;
• another $1 billion in ongoing local homelessness reduction funding – which has only fueled and funded massive growth in homeless in the state;
• another $1 billion “to increase access to child care;”
• expansion of Medi-Cal;
• expansion for CA Food Assistance;
• Funding to address sea level rise

The Tax Foundation concludes: “Low-income households were disproportionately impacted by the economic downturn due to the pandemic. As the economy continues to rebound, legislators should be wary of policies that could further harm this group. Instead of increasing corporate taxes, they should consider other options to raise revenue and make the tax code more progressive.”

There is much more at the Senate Democrats’ “Protect Our Progress” Budget Plan.