Even before the COVID-19 pandemic, the flood of businesses and residents moving from California to states like Utah and Idaho was robust and showed no signs of slowing. If anyone wants to know if that trend will continue, they need look no further than the insane asylum known as “tax policy” in California.
Boasting the highest marginal individual income tax rate of any state in the nation at 13.3% (Utah is at 4.95%) is just the beginning of the list of reasons taxpayers, businesses and wealth are fleeing California.
Thankfully for California taxpayers, tax hikes generally must pass with a two-thirds majority. Even with this high hurdle, legislators have proposed just about any tax hike you can think of. Here is just a small list of the legislation that has been proposed in 2020 in California as lawmakers considered a staggering $82.8 billion in annual tax and fee hikes (buckle up):
- AB 2712 – Tax Hike – $53.3 Billion on Most Goods and Services
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- Proposed creating the “California Universal Basic Income Program”, in which every California resident over the age of 18 would receive $1,000 per month from the government. The program would be funded by imposing a 10% value added tax on all goods and services except medicine, food, groceries and clothing.
- Status – DID NOT PASS
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- AB 85 – Tax Hike – $9.2 Billion on California Employers
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- Increases taxes on California employers over a 3 year period by limiting tax incentives and suspending tax relief for struggling businesses.The bill taxes research and development and COVID-19 research activities in California including the development of vaccines, treatments and testing kits, developing of medical equipment, development of work-from-home technologies and green technologies that help California reach its climate goals. The bill also suspends the Net Operating Loss Deduction, which will hit businesses hit hard by COVID-19 that may have significant losses in 2020 but could resume normal operations in 2021.
- Status – PASSED
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- AB 398 – Tax Hike – $2.1 Billion on California Jobs
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- Proposed a $275 per employee tax for five years on companies that employ 500 or more Californians, thus creating a fiscal incentive for companies to move jobs out of California.
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- Status – DID NOT PASS
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- AB 1659 – Tax Hike – $902 Million on Utility Users
- Proposed a tax on utility users in the form of a $3 billion bond that would be repaid with interest via a “surcharge” on utility bills. The tax would have been imposed on bills from investor owned utilities, not municipal utilities, for 25 years.
- Status – DID NOT PASS
- AB 1659 – Tax Hike – $902 Million on Utility Users
- AB 1253 – Tax Hike – $6.8 Billion Retroactive Income Tax Increase on Individuals
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- Proposed a personal income tax increase, retroactive to January 1, 2020 at the rate of an additional 1% on income between $1 million to $2 million up to 3.5% more on income over $5 million. That would hike California’s top rate of 13.3%, already the highest in the nation, to 16.8%, giving large taxpayers yet more incentive to flee to the state.
- Status – DID NOT PASS
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- AB 2466 – Tax Hike – $4.2 Billion on Soda
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- Proposed a tax of 2 cents per fluid ounce of sugar-sweetened beverages, concentrates and syrups on those who distribute these products in California. The tax would equate to $2.88 for every 12 pack of 12-ounce cans.
- Status – DID NOT PASS
In addition to legislation in 2020, California voters also dealt with Proposition 15, which would have been a $12 Billion property tax hike on commercial and industrial properties. The proposition would have created a “split roll” where residential properties continue to have the benefit of being assessed on their value for property tax on purchase price, however commercial and industrial properties would be assessed on market value, creating a massive tax hike on businesses large and small.
The revenue from the tax hike would be allocated to education funding. The majority of funding for the proponents of the measure came from billionaire Chen Zuckerberg, the wife of Facebook founder Mark Zuckerberg and from the California Teachers Union. After more than $140 million was spent on support or opposition to the measure, California voters defeated Proposition 15 with 52% voting NO and 48% voting YES.
The list goes on and on including proposals to tax in-state energy production ($1.6 billion hike), higher taxes on business pay ranges ($1 billion hike), enacting air district taxes ($490 million hike), limit on mortgage interest deduction ($360 million hike), surcharge for broadband ($66 million) and a tire tax increase ($55 million). Unfortunately, as taxpayers and businesses flee the onslaught of higher taxes and fees, it appears that the flow of incoming traffic from California to Utah will not be slowing down anytime soon.