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Miguel Santiago introduced the free tuition bill.
Assemblyman Miguel Santiago (Photo: Kevin Sanders for California Globe)

Massive New Tax Increase Proposed

The bill would apply retroactively

By Chris Micheli, July 28, 2020 10:20 am

Gutting-and-amending a bill originally related to local governments in the Public Resources Code, Assembly Bill 1253 now proposes a massive tax increase on thousands of sole proprietors and high-income Californians. AB 1253 was amended on July 27, the Legislature’s first day back from its extended summer recess.

Originally authored by Assemblyman Robert Rivas when it dealt with the Strategic Growth Council, the bill is now jointly authored by eight Assembly Members: Santiago, Bonta, Carrillo, Chiu, Gonzales, Kalra, Stone, and Wicks. Assembly Members Chu, Jones-Sawyer and Ting are coauthors, while Senators Skinner, Durazo, Gonzalez, and Wiener are also coauthors.

AB 1253 would add Revenue and Taxation Code Section 17044 to create three new tax rates for amounts of income above specified thresholds. As a tax levy, it would take effect immediately upon the Governor’s signature and chaptering by the Secretary of State. The bill would apply retroactively to tax years beginning on or after January 1, 2020. As a tax increase measure, it would require a 2/3 vote of both houses of the Legislature pursuant to Article XIIIA, Section 3 of the California Constitution.

Specifically, AB 1253 would add a new section to the Revenue and Taxation Code to provide the following three higher tax rates (in addition to the existing ones):

  • A 1% tax on income above $1 million, but not over $2 million
  • A 3% tax on income over $2 million, but not over $5 million
  • A 3.5% tax on income over $5 million

These thresholds would have to be recomputed for each tax year beginning on or after January 1, 2021 based upon the California CPI.

Under existing law, the highest base rate for individuals and sole proprietors is 9.3%. There is also the “millionaire’s tax” of an additional 1% for income in excess of $1 million.

Due to a statewide ballot measure, there are four additional tax rates (above 9.3%) ending at 13.3% for incomes above specified amounts. They are 10.3% for incomes between $269,000 – $322,000; 11.3% for incomes between $322,000 – $537,000; 12.3% for incomes between $537,000 – $1 million; and, 13.3% for incomes above $1 million.

If AB 1253 were enacted, the 13.3% rate would rise to 14.3% for incomes above $1 million and the state’s highest rate would be raised to 16.8% for incomes above $5 million.

California already has the highest tax rate in the nation of 13.3 percent, while the lowest is 1 percent in Tennessee, according to the Tax Foundation. Hawaii is the second highest at 11%. The Foundation also notes that nine states have single-rate levies on individuals’ income, while 32 states have graduated-rate income taxes. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not impose an income tax.

AB 1253 is pending a hearing in the Senate Governance and Finance Committee.

This article has been updated to correct: Assemblyman Robert Rivas is no longer the bill’s author, and the proposed tax increase will impact sole proprietors and high-income Californians.

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21 thoughts on “Massive New Tax Increase Proposed

  1. How many small businesses are left in CA after this state government induced shutdown? So many are gone and never to return, now the democraps want to tax the ones that are left? If the state wants more money then tax these pot clubs which seem to be doing real good these days. Every time I drive by a pot club the parking lots are always full of cars. I’ll bet they are not practicing “social distancing” inside. For the rest of us it should be a tax holiday.

    1. Do you make over $5 million annually Tim? If so congrats. If not then I don’t see much for you to be upset about.

      1. The problem in CA is not the money, it’s a management.
        Dems have had a super majority for a long time. With every problem the solution is tax the rich, and they get the money most of the time because it’s ok to discriminate against the rich. However, the problems don’t get fixed.
        We increased taxes ~50% over the last ~15 years. We used schools as the excuse. No fix! We even have the lottery and bonds to help, No fix! Wake up. Penalizing the rich, driving them from CA, is not helping.

      2. i make over 5 million and we are moving about 500 jobs out of California to Texas as of aug 1. We manufacture a product that EVERY house hold uses. We used to charge 4 dollars a can . Now we charge 7. At the end of the day guess who pays all the tax? Not just the millionaires, it passed off until people can no longer afford homes because it costs 50 percent more to build them . Does the product cost more to make? Not really, do companies build in the tax.. YES… Min wage went up, so does your hamburger. Our neighbors owned a tech company. Because of tax he moved most of his operation to China. He made such a great statement. He said I was paying 3 percent on billions to California, Now I pay 5 percent of 0.. Keep taxing the rich. Your products will go up in price and we move jobs out. Taxing the rich is a great idea until you no longer have anyone who is rich to pay your taxs.

  2. and yet the people keep voting them in…they are all traitors to the country and should be treated as such.

  3. We are lucky to have so many Democrats in office in California, other wise would not have the ability to get these tax increases. We have the good fortune also they have shut down so many small businesses these taxes will not impact them for they will never be any more in operation and the remaining ones will get to pay the taxes and the lucky shopper will get to pay more for these taxes. Luckily the Democrats all have such high incomes these taxes will be a blessing to pay.

  4. California is working on killing the goose that lays the golden eggs. They apparently think that Silicon Valley people are so “woke” they won’t mind being bled dry. Combine this with work at home mandates, higher business property taxes, rising crime and riots and there is no reason to stay in Kalifornia.

  5. Run from any bill that has Wiener’s name on it. Whether you are a Republican or a Democrat it will bite you in the a$$.

  6. They are taxing also small business and individuals , some proprietors idiot!, And If anything., One million is GROSS idiot. After deductions , small businesses do not even have money left to pay for bills!.

  7. Hell, yeah! Sometimes the only way to fight fire is with fire…start a fire that burns into the fire you’re trying to put out, called a backfire. Well, everyone that is within 20 miles of coastline should pay an additional 20%, and double that if the beach is close enough to be on a bus line. See, the most demented of the crazies are almost all coast-dwelling lefties. That’s why CA is more normal when you go north and inland. Burn out the liberals with taxes and you have a pretty nice state left…but, like bedbugs, you gotta get’em all!

  8. Elect all liberals, put them in a playground (capitol) with no natural predators (conservatives) and tell them they’re free to play without constraint, and that no matter what, as long as they keep a “D” after their name, they’ll be re-elected. What could go wrong? Well, Exhibit A: CA, that’s what. And they’re just gettin’ warmed up.

  9. Easy solution is to move your business over here to Nevada. Nevads has no state income on individuals and a small commerce tax for companies having sales over four million. Housing is far cheaper. Small and medium size businesses lilke dealing with the local authorities since Nevada is pro business.

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