FILE - California State Capitol

Cherry tree blossoms over the California State Capitol Building in Sacramento Content Exchange

(The Center Square) – A bill introduced this week in the California Legislature would increase income taxes on people there who make more than $1 million a year, bringing in billions of dollars that supporters claim are needed to improve public schools and government services during the coronavirus pandemic.

Critics say it could drive more wealthy people from the state.

The legislation would add three new surcharges on income tax, starting at an additional 1 percent levy on adjusted gross income starting at $1 million. That would increase to 3 percent starting at $2 million and go to 3.5 percent on incomes above $5 million. Estimates show the new taxes would bring in $6.8 billion annually.

For those above the $5 million mark, it would mean their combined state and federal income tax rate would be 54 percent. The bill’s sponsors said the new rates would impact only 0.5 percent of the state’s taxpayers, but according to the California Franchise Tax Board, those earners already pay 40 percent of the state’s tax collections. The increase would also apply to capital gains, which in California are taxed at the same rate as regular income.

If the bill is passed by a super majority in both chambers of the California Assembly and signed into law by Gov. Gavin Newsom before the legislative session ends Aug. 31, it would take immediate effect and be retroactive to Jan. 1, 2020. Top earners who pay taxes quarterly would see the impact beginning with their Sept. 15 bill.

Under President Donald Trump’s tax cuts, the deduction on state and local taxes is capped at $10,000, meaning those top earners would not be able to deduct the new taxes on their federal returns.

The largest group of people facing the new taxes work in the tech industry, which is highly mobile. Many of them continue to work remotely during the pandemic and could easily move to nearby Nevada, which does not have a state income tax, critics note.

“The tax hikes would be the tipping point for many taxpayers,” said Robert Guitierrez, president of the California Taxpayers Association, in a statement, “prompting them to book a one-way ticket to one of the 49 states with lower taxes.”

California’s current top marginal income tax rate is 13.3 percent, highest in the country.

While a temporary income tax increase on those earning more than $250,000 a year that was approved by voters in 2012 is set to expire in 2030, this increase would be permanent.

This article originally ran on

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