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Democratic Lawmakers Want Tax Hikes For California’s Million-Dollar Earners

The California Capitol building in Sacramento
Andrew Nixon
The California Capitol building in Sacramento

Amid the coronavirus crisis, some lawmakers want to raise taxes on the state’s top earners to boost services for schools and unemployment benefits. Critics say it could slow California’s economic recovery.

More than a dozen Democratic state lawmakers have signed on to a proposal to raise taxes on California’s wealthiest earners to offset lost revenue due to the coronavirus crisis.

Assembly Bill 1253 would tax income above $1 million an extra 1%. Earnings above $2 million would get hit with a 3% tax hike, while that above $5 million would be taxed an extra 3.5%.

Principal sponsor Assemblyman Miguel Santiago (D-Los Angeles) calls it a “modest” increase for the state’s highest earners to boost services for those hit hardest by the virus — particularly communities of color.

He estimates the tax increases would only impact half a percent of all Californians.

“There are people who are very blessed and doing very well in this COVID economy, but for the other 99.5% of people, there’s a lot of hurt and pain out there,” Santiago said. “There’s a serious desperation to see if they can pay their bills, buy groceries and actually make their rent.”

Santiago says as he volunteers at food banks in his district,which is one of the poorest in the state, he has seen the lines for food persist throughout the pandemic.

“I think we have a responsibility — as tough as it may be — to ask those who are wealthy to pay their fair share and help those that have been left behind,” he said.

The bill could raise around $6.8 billion next year, according to Santiago, and would net even more when the economy improves. The money would go to the general fund, where it could be used to pay for schools, unemployment benefits, health care or other services.

If approved, the bill would take effect retroactively — from January of this year. That means million-dollar earners would owe more on next year’s tax deadline, and the state would have access to that revenue for its 2021-22 budget.

The California Taxpayers Association, which opposes the bill, argues it would push job creators into other states and slow California’s pandemic recovery.

“As Californians struggle through a pandemic and recession, the last thing they need is a retroactive tax increase,” president Robert Gutierrez said. “California’s status as a high-tax state already has resulted in business flight and many lost jobs, and this bill would only make things worse.”

The bill would need approval from two-thirds majority of lawmakers in both chambers, which Santiago acknowledges could be “a challenge.”

Labor unions have recently made calls for higher taxes on the state’s top earners to close gaps in the state’s coronavirus response.

The California Teachers Association endorsed Santiago’s bill instead of a $100 billion stimulus package proposed Monday and backed by top Democratic leaders. The stimulus proposal would not raise taxes and would instead let filers prepay their taxes at a discount to raise money.

“Families and communities across the state are struggling and looking for real solutions that address health, economic, racial, and environmental inequality,” CTA President E. Toby Boyd said. “The stimulus plan contains elements of solutions, but unfortunately lacks the clear bold step of asking the very individuals who are profiting and profiteering during this crisis to increase their tax contributions to help our state heal.”

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