Playing to bad tax-and-spend stereotypes of California Democrats, Assemblymen Kevin McCarty and Phil Ting have offered a counter-productive, ill-considered and ultimately futile proposal to raise corporate taxes.
It should be withdrawn and buried, never to be heard from again.
The measure, Assembly Constitutional Amendment 22, seeks to ask voters to impose on corporations doing business in California a “surcharge” of 10 percent on net earnings of more than $1 million, as The Sacramento Bee’s Alexei Koseff reports.
The windfall – as much as $17 billion a year – would go to low-income workers in the form of an expanded earned income tax credit, tax rebates or other tax relief to be determined, and would be spent on more state-funded child care, early childhood education, affordable health care and college financial aid.
It all sounds so good.
But it is a tin-eared attempt by McCarty, D-Sacramento, and Ting, D-San Francisco, to resist President Donald Trump and congressional Republicans who approved a massive federal tax cut for corporations. It’s especially ill-timed when Gov. Jerry Brown anticipates sufficient tax revenue to maintain a $13.5 billion reserve fund this year.
We do hope there’s money in this year’s budget to expand California’s earned income tax credit. And we dislike much of Trump’s tax overhaul. But ACA 22 is the sort of concept that legislators offer up when they talk amongst themselves and a few others who don’t dare question them.
It has no chance of winning the necessary two-thirds vote in the Legislature needed to place it on the ballot. And yet it has political downside for the Democratic Party. Republicans are capitalizing on their announcement, pointing out that if Democrats hold two-thirds majorities in both houses after the 2018 election, they could pass such punitive tax increases.
Certainly, Ting and McCarty did no favors for Sen. Josh Newman, D-Fullerton, who faces a recall in June, supposedly over his vote to raise gasoline taxes in 2017. Newman holds a swing seat, and without him, Democrats would lose their two-thirds majority in the Senate.
There’s plenty broken with California’s tax structure. But its 8.84 percent corporate tax rate is already relatively high compared with other states. Bills that blindly seek to soak big business and the rich at a time of budget surplus solve nothing.
California’s tax system should be updated to match a 21st century economy. The high sales tax rate, which hits low-income people hardest, ought to be lowered, and certain services used by wealthier people and corporations ought to be subject to taxes. Proposition 13, the property tax cutting measure approved by voters 40 years ago, could be revisited.
The time may come when California needs to turn to corporations for more revenue. But not when there is a $13.5 billion budget reserve, and not simply because Democrats dislike the current occupant of the Oval Office.