California Democrats pushing 2 plans to tax the rich in coronavirus downturn
California Democrats on Thursday announced a second union-backed plan to raise taxes on the state’s millionaires as a way to generate revenue for schools and government services a week after their first attempt failed to earn a vote during a committee hearing.
As California’s economy reels from the coronavirus — with unemployment numbers skyrocketing to nearly 15% in June — the Legislature’s more liberal Democrats and the state’s most powerful public employee unions have argued millionaires should help shoulder the financial burden of COVID-19.
“We had folks who were barely hanging on who can no longer hang on. We’ve had people who were teetering on the edge who have fallen over. And we need to be there to catch them,” Assemblyman Rob Bonta, D-Alameda, and author of the latest tax bill, Assembly Bill 2088, said during a Thursday Zoom conference. “This is an approach that is a progressive approach.”
California’s seven-figure earners already pay the highest state income tax rate in the country — 13.3% — according to the Tax Foundation.
The Democrats’ most recent plan would levy a 0.4% tax on Californians with a net worth of $30 million or more. The legislation would affect about 30,000 residents, less than 1% of Californians, Bonta said, and generate $7.5 billion for schools and the state’s social safety net.
Earlier this month, lawmakers also announced Assembly Bill 1253, which would bump income tax rates by imposing three new surcharges on the state’s wealthiest households: 1% for taxable income over $1 million, 3% for income over $2 million and 3.5% for income over $5 million. That meaning California’s wealthiest could pay 16.8% on income earned over $5 million.
The billions in projected revenue could help the state fill an estimated $20 billion gap to K-12 and community college education system, according to labor groups like the California Teachers Association and the Service Employees International Union.
“We are seeing families who are desperate,” said Denise Solis, Northern California Director for the SEIU-United Services Workers West. “It’s needless in a state where we have so many resources.”
Lawmakers only have 18 days to pass bills until the Aug. 31 session deadline and it’s unclear whether either proposal will get a vote.
Bonta said the coalition plans to pursue both options, “perhaps both to be implemented,” next year at the start of session.
The bills could divide the more left-leaning faction of the Legislature and moderate Democrats who’ve said they’d like to avoid raising taxes as a solution to the recession brought on by the coronavirus outbreak.
During an Aug. 3 informational hearing on the first tax plan, both Republicans and Democrats raised concerns.
State. Sen. Bob Hertzberg, D-Van Nuys, said he was “worried about creating a system that’s highly volatile” during economic downturns, while Republican state Sen. John Moorlach of Costa Mesa warned against another tax he said would encourage entrepreneurs to flee California in search of more business-friendly territory.
“We already have the highest personal income tax rate in the nation,” Moorlach said.
This story was originally published August 13, 2020 at 1:03 PM with the headline "California Democrats pushing 2 plans to tax the rich in coronavirus downturn."