A California Chamber of Commerce-opposed job killer bill that would increase the personal income tax rate from 13.3% to 14.3% will be considered by the Assembly Revenue and Taxation Committee today.
AB 2351 (Eggman; D-Stockton) has been tagged as a job killer because it unfairly targets and discriminates against one category of taxpayers who are already highly taxed, which will limit their desire or ability to continue to grow their businesses in California. Employers could also be forced to mitigate these costs through means that include reducing their workforces.
The current personal income tax rate of 13.3% is already, by far, the highest in the country.
The bill would, for the tax years beginning on or after January 1, 2020, impose an additional tax of 1% on income that exceeds $1,000,000 and deposit the revenues into the Higher Education Assistance Fund, for the purposes of funding student financial assistance for specified students enrolled at the University of California, the California State University, and the California Community Colleges.
While agreeing that funding higher education is an important policy issue, CalChamber disagrees with the proposed revenue source set forth in AB 2351.
As recently reported by the Legislative Analyst’s Office (LAO), the top 1% of income earners in California already pay half of all income taxes received. The LAO also noted that the income of these top earners comes largely from capital gains, and therefore, the revenue received is volatile and difficult to predict. CalChamber has consistently stated that any tax increase should be broad-based and shared by all so that the financial impact is mitigated.
These top income earners upon whom the General Fund is so reliant, also are the same individuals who would be exposed to the proposed tax increase under AB 2351.
In the bill letter, CalChamber says that California should not continue to target these high earners with additional taxes, when they already contribute such a significant amount of revenue to the General Fund. Loss of any of these taxpayers due to higher taxes as proposed under AB
2351, through either a change of residence or limiting growth in California, will create even greater pressure on the General Fund to financially support important programs such as higher education.