California Democrats plan to eat the rich with tax proposal
July 9, 2008
The Sacramento Bee reports that Democrats are determined to eat the rich in California as it proposes “billions in tax increases on businesses and high earners to help bridge California’s budget shortfall. The proposed hikes include rolling back the dependent child income tax credit expanded in the 1990s, creating two higher income tax brackets for the state’s biggest earners and increasing corporate taxes.”
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http://www.sacbee.com/static/weblogs/capitolalertlatest/013760.html
New income tax brackets
Revenue generated: $5.6 billion
Reinstates 10 percent and 11 percent tax brackets for wealthiest Californians. Income tax rates range in California from 1 percent to 9.3 percent. The new proposal would raise the rate to 10 percent for “taxpayers filing joint returns with taxable income above $321,000 and 11 percent for those with incomes above $642,000.”
Suspend “net operating losses” for corporations
Revenue generated: $1.1 billion
For three years, big business would lose its “net operating loss” deduction. That allows companies to carry forward losses from one year to the next and use them as a deduction in taxes.
Suspend inflation indexing of state income tax brackets
Revenue generated: $815 million
This plan would suspend the adjustment of income tax brackets for inflation. As a result, Democrats say, a single filer with a taxable income of $50,000 a year would pay $34 more, while a taxpayer with income exceeding $97,000 would pay about $180 more.
Eliminate dependent credit for those with incomes above $150,000
Revenue generated: $215 million
The dependent tax credit was $294 last year. The LAO proposed lowering the credit to $94 — the amount of the individual exemption. The legislative Democrats have proposed lowering the tax credit for those taxpayers with adjusted gross income above $150,000.
Raising the franchise tax
Revenue generated: $470 million
The top tax rate for corporations is currently 8.84 percent. The proposal returns the tax rate to 9.3 percent, where it was in 1997.
Steps up tax enforcement
Revenue generated: $1.5 billion
This is a plan to collect taxes already owed to the state, to be “modeled after successful tax amnesty efforts in the past,” according to legislative Democrats. They said some of the $1.5 billion in revenue “will be an acceleration of revenues that would be paid in the future.”
Dan Weintraub analysis (sacbee)
http://www.sacbee.com/static/weblogs/capitol_alert/insider/archives/013784.html
excerpt…
“My sense is that, faced with united Republican opposition, the Democrats at some point will try to make their plan more palatable. They might find a few more cuts, add in some deferrals and gimmicks, making the tax increase smaller. Maybe they will agree to make more of it temporary (the suspension of indexing and the net operating loss provision, and the tax amnesty are all the equivalent of temporary tax increases already). Republicans would probably still be opposed, but if they got some kind of true spending reform, some of them might be willing to go along.”