Council Hitting Back Against Dangerous New Taxes

Dangerous new legislation, AB1253, surfaced last week in Sacramento proposing a massive new personal income tax increase that will undermine California’s recovery from the worst economic crisis in decades, worsen our already challenging business climate, further diminish California’s ability to compete for jobs and investment, and make our state budget more volatile. 

The Bay Area Council is strongly opposed to this badly misguided bill and we are partnering with the California Chamber of Commerce, the California Tax Association and dozens of business groups across the state to defeat it. It’s just one of a growing number of state and local tax measures, including the so-called CEO tax in San Francisco, targeting California’s economic engine. Council CEO Jim Wunderman in two related stories this week in the San Francisco Business Times highlighted the huge threat these measures pose for California’s economy, now and in the future.

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The overall scale of these increases is staggering, and the negative impact they would have on California’s economy is catastrophic. These tax increases on the entrepreneurs, investors, sole proprietors and small business owners who are the life blood of California’s economy, and combined with federal taxes, would push the state’s top income tax rate to 53.8 percent. Previous tax increases, which gave California the dubious distinction of having the highest income taxes in the country, resulted in a 42 percent spike in departures of high-income individuals relative to before the passage of the tax increases.

AB1253 would accelerate the flight of business, investment and jobs from California, particularly as the shift to remote working during the COVID-19 pandemic makes it easier to locate anywhere. It would exacerbate California’s already risky dependence on high-income earners, who account for more than 40 percent of the state’s general fund budget. And with all the money going into the state’s general fund, there would be no accountability for how it is spent.

The Council is not rigidly opposed to all taxes. Over the years, we have sought voter approval of tax measures that broadly share the burden of funding important infrastructure projects, expand affordable housing, address homelessness and support early childhood education programs, among others. We also supported Prop. 30 in 2012 with the promise that it would be temporary, only to see it become permanent. But AB1253 is bad medicine at the wrong time.