By Cristina Rivera, Executive Director, CASE
We hoped it wasn’t coming.
We knew it probably was.
But now it’s here, and we’re in for a fight.
The first Senate Democrat income tax increase has been introduced, so Republicans had better get ready.
The current top income tax rate in California is 9.3% – already the highest in the nation. Under the proposal just introduced, the top rate would increase to 11%. Worse, this proposal (SB 96) would dramatically raise taxes on the middle class. For families earning between $60,000 and $125,000, the personal income tax rate would be 9.5% and for families earning between $125,000 and $250,000; the rate would be 10%.
It’s bad enough that we’re talking about raising taxes in the middle of a recession. Worse, this proposal will help drive countless numbers of small businesses out of the state. Many small businesses that operate here in California do not pay corporate taxes – they pay the same rates as those families pay. Because of that, this increase will add to our unemployment problems by driving jobs out of the state.
While a fiscal impact analysis hasn’t been done on this legislation yet, it’s pretty certain that it will be “scored” as a revenue gain for the state budget. What liberals don’t seem to understand is that raising taxes – especially by such a large percentage – has the effect of driving businesses and jobs – and tax dollars – out of California.
The faulty logic upon which too many liberals rely is that people and capital will remain in California under any and all circumstances. They don’t understand people can move and capital can flee. Just because we’re California doesn’t mean that people and jobs will remain.
Instead of introducing a 15% income tax hike, a better solution would be to let people keep more of what they earn in order to stimulate the economy. A tax hike of this magnitude will take money out of the pockets of California’s middle class at exactly the wrong time.
While it’s true that we face a serious budget situation, we can fix the problem by adopting real and long term structural reforms that don’t involve raising income taxes on California’s working families. People are struggling to make ends meet right now and small businesses are doing everything they can to keep their doors open. An income tax increase now will only serve to make the matter worse.