Addressing Tax Fairness in California
In the wake of President Joe Biden’s State of the Union address, which highlighted the need for tax reform targeting the wealthiest Americans, California finds itself at a crossroads. The president’s call to reverse the 2017 tax cuts and implement more equitable taxation measures resonates deeply with the state’s current fiscal challenges and social disparities.
California’s Legislative Analyst’s Office has projected a daunting $73 billion budget deficit, threatening funding for critical areas such as education, affordable housing, and climate change initiatives. The California Budget and Policy Center underscores the urgency, pointing out the stark income inequality reminiscent of the Great Depression era. With the bottom two-fifths of earners experiencing a decline in income and the top 1% seeing a dramatic increase, the state’s tax system appears regressive when considering all state and local taxes combined.
State and local governments are now considering various strategies to ensure fair taxation. Ending tax breaks that favor large corporations and the wealthy could reclaim an estimated $70 billion annually. State Sen. Nancy Skinner’s proposal to increase corporate tax rates for the largest companies promises an additional $6 billion for public services.
Furthermore, taxing excessive CEO pay is on the table. A proposed bill would see companies with high CEO-to-worker pay ratios facing increased corporate tax rates. San Francisco has already taken action by approving a surtax on companies with extreme executive pay disparities.
On the horizon is the possibility of a wealth tax, which has been proposed in California and other states. Such a tax could generate significant revenue, particularly from the state’s highest earners. Despite opposition from Gov. Gavin Newsom, public support for a wealth tax is growing, with recent polls indicating strong voter backing for taxing billionaires.
As California grapples with its budget deficit and seeks to address income inequality, these proposed measures represent a concerted effort to redistribute the tax burden more fairly. With public opinion increasingly favoring such reforms, state legislators are under pressure to act decisively.
