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In summary
Hoping to capitalize on public resistance to tax increases, California business and anti-tax groups have approved a measure for the November ballot that would make it more difficult to raise state and local taxes. This is a showdown that has been building for nearly 50 years.
Californians will cough up billions of dollars this month as they file their federal and state tax returns and pay their second installment of property taxes.
how much?
California individuals and California-based businesses pay approximately $5 trillion in federal taxes each year, primarily personal income taxes, Social Security, and Medicare payroll taxes. They also pay at least another $5 billion to state and local governments, primarily in personal income, sales and property taxes.
No matter how you look at it, California is a high tax state.
The Tax Foundation, a Washington-based organization that tracks tax trends across the country, recently reported that the California state government imposes the highest per capita taxes in the nation at $7,200, which is approximately Equivalent to $280 billion. As part of his $4 trillion economy, California’s $540 billion in state and local taxes ranks fifth at 13.5%.
These numbers and the state’s multibillion-dollar budget deficit set the stage for a massive, multi-pronged battle over tax policy this year, including three that could dramatically change the politics of tax policy. Statewide ballot measures are also included.
Progressives in the Democratic Party, with strong backing from public employee unions, argue that new taxes are needed to maintain essential welfare, education and health services. But Gov. Gavin Newsom has publicly ruled out raising taxes and has proposed a budget that, at least on paper, would eliminate the deficit, including spending deferrals, bookkeeping, loans and infusions of money from state reserves. ing.
Two years ago, when two of California’s most prestigious polling organizations, the University of California, Berkeley’s Institute for Governmental Research and the Public Policy Institute of California, asked residents about their tax burden, both found that residents were struggling with other living expenses. It was found that dissatisfaction was growing as the participants felt that .
The poll showed voters’ rejection of a proposed tax increase on the 2020 ballot that would have changed Prop. 13, the iconic property tax cap approved by voters in 1978, by increasing taxes on commercial real estate. was interrupted.
Hoping to capitalize on public resistance to tax increases, business and anti-tax groups led by the California Business Roundtable have approved a bill on the November ballot that would make it more difficult to raise state and local taxes. did.
If passed, the bill would require a two-thirds vote to raise local taxes, effectively overturning a state Supreme Court ruling that required only a simple majority to approve initiated local taxes. That will happen. Additionally, any state tax increase would require voter approval and a two-thirds vote of the Legislature.
The bill’s eligibility has set off a legal and political war between Newsom, the Legislature, and pro-tax interests such as labor unions. Newsom and the state Legislature are suing in hopes of convincing the state Supreme Court that the bill is a constitutional amendment, not an amendment, and therefore cannot be enacted voluntarily.
Conflicting interests have filed written arguments with the court, but the court has not formally decided whether to accept the lawsuit. If that happens, the bill would have just a few months to declare whether it will be placed on the ballot.
Congress also has its own measure on the ballot that, if passed, would require the business tax restriction measure itself to be approved by two-thirds of voters. It also passed another ballot measure narrowing the vote margin for a local tax and bond measure that would increase spending on housing and infrastructure from two-thirds to 55%, potentially overriding the Business Roundtable measure. There is.
This showdown has been building for nearly 50 years, ever since Proposition 13 was approved. Countless billions of dollars are at stake, and hundreds of millions of dollars could be spent for or against his three interrelated measures.
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