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Undeterred by the mass exodus currently underway in California, legislators are pushing a state constitutional amendment that could double the state’s already high-income taxes.
Under the new scheme, individual households would on average be slapped with an astounding $12,250 in increased taxes, according to the conservative Tax Foundation’s Vice President of State Projects Jared Walczak. Increased payroll taxes would kick in for employees making more than $49,990 which is significantly less than the estimated $68,000 needed for a family of three to just get by living in the state.
The tax hikes would be authorized under ACA 11 which was introduced on Jan 6 and would be used to fund a universal health care program proposed by Assembly Bill 1400. Together the bills would create a $200 billion taxpayer-funded single-payer health care system for all state residents, regardless of citizenship status.
And since California is already doing such a fantastic job of managing things like crime, education, and homelessness, it only makes sense that they want to get into the health care business too.
California waterways polluted with alarming levels of dangerous fecal bacteria due to homelessness https://t.co/Cb2heWH7sm pic.twitter.com/doUnWRHsE4
— Conservative News (@BIZPACReview) January 12, 2020
Walczak explained there are two additional taxes on top of the payroll taxes including a surtax on top of the existing individual income tax structure starting for those making $149,509 or more and a 2.3 percent gross receipts tax on any gross business income after the first $2 million.
The issues with the proposal are mind-boggling as Walczak described the tax “cliff” that employers with 50 employees would face.
“Imagine, for instance, the overly simplified hypothetical of a company with 49 employees making $80,000 each. At 49 employees, the company has no payroll tax burden. Hiring one additional employee generates a tax bill of $90,000 – more than that employee’s salary!” he wrote.
The gross receipt plan to siphon money from businesses is equally problematic as it has the potential to wipe out any actual profits the business was expecting to make.
“Gross receipts taxes are widely understood as extremely disruptive and inequitable taxes, because they are imposed on businesses without regard to their profit margins,” Walczak explained. “For low-margin businesses like supermarkets, 2.3 percent of gross receipts may literally exceed current profits even if the company is doing well. For instance, Kroger’s profit margins dipped to 0.75 percent in late 2021 and have historically hovered around 1.75 percent.”
“These taxes are even worse for businesses posting losses, including startups that haven’t turned profitable yet, because they are taxed on their receipts even if their expenditures exceed revenues. For startups, a high-rate gross receipts tax could be disastrous,” he added.
One response indicated that it might be more fun to let the bill that will have to be approved by California voters pass so the country can continue to watch the western state implode on itself.
I kinda hope it passes so we can have a current-day example of how you can’t tax your way to prosperity
— Dad-dor the Relentless (@Scot4Liberty) January 8, 2022
Perhaps unsurprisingly, the new tax hike proposal comes at a time when California has experienced a huge budget surplus which as of last May was expected to run over $75 billion.
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