A pair of California lawmakers want to claw back some of steep tax cuts that corporations will receive under the federal tax overhaul signed last month by President Donald Trump.
Democratic Assemblymen Kevin McCarty of Sacramento and Phil Ting of San Francisco announced Thursday that they will pursue a constitutional amendment to add a surcharge on large companies that do business in California, potentially raising billions of dollars to expand social services for Californians.
“We’ve seen enough billionaire justice from the presidency,” McCarty said in an interview. “It’s time for middle class tax justice.”
Trump’s plan reduced the federal corporate tax rate from 35 percent to 21 percent, which Republican and business leaders hailed as an incentive for a surge of capital investment and job growth. But Democrats denounced the change as a giveaway to the wealthy that would grow the national debt and require future cuts to welfare programs such as Medicaid.
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The proposal from McCarty and Ting creates a new tax for businesses in California, which already has a state corporate tax rate of 8.84 percent. Companies with annual net income of more than $1 million in California would pay an additional surcharge of 7 percent, or half their savings from the recent federal tax cut.
If approved by two-thirds of the Legislature, Assembly Constitutional Amendment 22 would go before the voters for final consideration. Proponents estimate it would raise between $15 billion and $17 billion a year, which would be directed toward funding for education, college affordability initiatives, child care and preschool slots, taxpayer rebates and an expansion of California’s Earned Income Tax Credit.
Business groups have long complained that California is among the worst states in the country for companies because of its high taxes and extensive regulations. But with the “Trump tax giveaway,” McCarty said, corporations can now afford to give some of the money back to Californians who need the help.
Rob Lapsley, president of the California Business Roundtable, said the proposal would only push more companies out of California or force them to shut down entirely.
“Many large employers, including California-based companies, have announced bonuses or pay increases as a result of the recently enacted tax reform, putting more money in the pockets of hardworking Californians,” he said in a statement. “Imposing tens of billions of dollars in new taxes on employers will be a major step backwards that will only hurt middle-class Californians struggling to make ends meet.”