California Considers Plan to Double Its Taxes despite Already Being Highest in U.S
The amendment would increase state revenue by $163 billion a year
One of the reasons California is losing so many residents is mostly down to the blue state's crippling taxes.
But the Golden State failed in connecting the dots and is now pursuing a state constitutional amendment to double taxes.
The proposed amendment, ACA 11, would increase several key taxes in order to fund a state-level government healthcare scheme.
The increase would hike the average household’s taxes by an unbelievable $12,250, according to the Tax Foundation.
The amendment would increase state revenue by $163 billion a year, more revenue than California in an entire year before 2020.
The tax hikes take three forms, according to the Tax Foundation’s Jared Walczak.
There is the income surcharge (on top of the already-high state income taxes) which applies to start at $149,509 in earnings.
Then there is a payroll tax add-on, where the top rate would apply to employees earning over $49,990.
And the 2.3% business tax hike on gross receipts above the first $2 million a business takes in.
California lawmakers have introduced a plan to almost *double* state tax revenue, at an additional cost of $12,250 per household.— Jared Walczak (@JaredWalczak) January 6, 2022
A new 18.05% all-in top marginal rate on income.
A 2.3% GRT would be 3x the nation's current highest.https://t.co/Ov2lqVXeL8 #CALeg #capolitics
The proposed increase comes as the California government is already seeing record tax revenue.
Critics argue that tax increases are harmful to the economy, most notably the gross receipts levy.
Walczak said that due to the payroll tax increase kicking in at 50 employees, it effectively creates a “tax cliff," taxing businesses and discouraging growth.
“Imagine, for instance, the overly simplified hypothetical of a company with 49 employees making $80,000 each,” he writes.
“At 49 employees, the company has no payroll tax burden. Hiring one additional employee generates a tax bill of $90,000 — more than that employee’s salary!”
“Gross receipts taxes are widely understood as extremely disruptive and inequitable taxes because they are imposed on businesses without regard to their profit margins."
"For low-margin businesses like supermarkets, 2.3 percent of gross receipts may literally exceed current profits even if the company is doing well."
"For instance, Kroger’s profit margins dipped to 0.75 percent in late 2021 and have historically hovered around 1.75 percent."
"These taxes are even worse for businesses posting losses, including startups that haven’t turned profitable yet, because they are taxed on their receipts even if their expenditures exceed revenues.
"For startups, a high-rate gross receipts tax could be disastrous.”
Proponents say Californians should be happy because they would get “free” government healthcare because of the tax increases.
But with a household facing $12,250 in taxes, is it worth it?