It’s the last day of session for the California Legislature, where state lawmakers have a few more hours to send another tax increase to Governor Gavin Newsom’s (D) desk. What’s unique about the latest tax proposals pending in Sacramento is that Golden State lawmakers are targeting more than future earnings. They’re also seeking to raise taxes on past earnings and levy the nation’s first tax on accumulated wealth.
Assembly Bill 1253, which already passed out of the California Assembly by a 59 to 17 vote in May, would create three new top income tax rates in a state that is already home to the nation’s highest income tax rate at 13.3%. “If passed,” writes Forbes contributor Robert Wood, “high income Californians would pay another 1% on income over $1,181,484, 3% on income over $2,362,968, and 3.5% on income over $5,907,420.” Not only that, AB 1253 applies these rate hikes retroactively to January 1, 2020.
California’s new top rate under AB 1253 would be 16.8%, which is a 26.3% increase from the state’s current top rate. AB 1253 provides yet another tax increase that is marketed as a way to target the rich, but which will also ensnare small businesses that have been ravaged by pandemic-driven closures and the associated economic downturn (that’s not to mention the riot-caused property destruction that has devastated the life’s work of some small business owners).