Capitol Alert

Donald Trump gave corporations a big tax cut. California Democrats want to take some of it

Citing a tax windfall that major corporations received through President Donald Trump’s 2017 tax law, California Democrats on Monday unveiled a plan to levy a steep tax hike on the state’s most profitable businesses.

Sen. Nancy Skinner, D-Berkeley, is the primary author of Senate Bill 37, which would raise the minimum amount of tax collected for the top 0.2 percent of companies that do business in California.

“Corporate profits are at an all-time high, yet the portion of tax revenue California receives from corporations is at close to its lowest point in 40 years,” Skinner said in a statement announcing the bill. “SB 37 just asks corporations to pay their share, so we can cut income inequality and help fund our kids, our teachers, and our schools.”

Her bill marks the second time that California Democrats have called for new taxes on corporations since Trump’s tax law took effect. Last year, Assemblymen Phil Ting of San Francisc, and Kevin McCarty of Sacramento proposed a constitutional amendment to create a new business tax. Their proposal died in a committee.

Among other changes, the tax bill Trump signed in December 2017 cut the federal corporate tax rate from 35 percent to 21 percent.

Skinner’s spokesman said the lawmakers now are trying to craft the bill in a way that would avoid going to the ballot. It would need to pass the Legislature by a two-thirds majority.

Specifically, sponsors say the bill would raise at least $2.5 billion in annual revenue, which would be appropriated to the state’s K-12 schools and pre-schools.

SB 37 would base the floor on a corporation’s tax bill on the disparity between how much its CEO makes and how much the median employee makes:

  • If the CEO makes between 0 to 50 times as much, the rate would be 10.84%.
  • If the CEO makes 50 to 100 times as much, the rate would be 11.84%.
  • If the CEO makes 100 to 200 times as much, the rate would be 12.84%.
  • If the CEO makes 200 to 300 times as much, the rate would be 13.84%.
  • If the CEO makes more than 300 times the median employee income, the rate would be 14.84%.

In a statement announcing the bill, sponsors cited the income of several top-earning CEOs, including the chief executives of Mattel, who makes 4,987 times what the average Mattel employee makes, McDonalds, who makes 3,101 times, and Gap, who makes 2,900 times; all figures came from the U.S. Securities and Exchange Commission and the Economic Policy Institute.

“Increasing taxes on big corporations and incentivizing those corporations to pay their employees higher wages is a progressive way to capture new funding for our schools and other programs, while reducing the income inequality of regular Californians,” Skinner said in a statement.

Jon Coupal, president of the fiscally conservative Howard Jarvis Taxpayers Association, criticized the bill, saying that it would keep California at the top of Chief Executive magazine’s list of worst states in which to do business, a designation he said California has held for 14 years running.

“We have to keep in mind that California has the highest corporate income tax west of the Mississippi,” he said, “We are competing against numerous states in our region for economic growth.”

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