California Weighing Proposal That Could Double Its Taxes

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    California legislators unveiled a new bill that would create a single-payer system of health care at the start of the year. This ambitious plan would be funded almost by double the state’s high taxes.

    The Tax Foundation, an independent group that advocates for lower taxes, has released a new analysis. It found that the proposed constitutional amendment would raise taxes by approximately $12,250 per household to pay for the first-of-its-kind health care system. The tax increases will raise $163 billion more annually, more than California has raised in tax revenue since the pandemic.

    Jared Walczak (a fellow at Tax Foundation), said that the proposal included three major revenue-raisers: higher income taxes for wealthy Americans, a payroll and wage tax on large employees, and new gross receipts or gross receipts tax.

    The bill would increase the top marginal wage income rate to 18.05%. This is well above the 5.3% median top marginal rate and the 12.3% state rate. The 18-bracket system would have higher taxes for those earning more than $149,000.

    California will also increase the payroll tax for employees earning more than $49990 annually if they work in a company with more than 50 workers. Walczak pointed out that the plan could discourage small businesses from expanding, creating a tax cliff. If a company with 49 employees earning $80,000 per year hired an additional employee, it would create a tax bill that exceeds $90,000.

    The state would also adopt a 2.3% gross receipts (GRT), on qualified businesses, minus the first 2 million annual gross receipts. This rate is more than three times the current country’s highest GRT.

    Walczak pointed out that the proposed tax hikes come as California struggles with high numbers of residents moving to red states with lower taxes. An independent Tax Foundation analysis, based on Census Bureau data, shows that California’s population declined 0.8% in 2021 while states with lower taxes saw their numbers increase.

    Walczak stated that “Practically, doubling state taxes–even though the burden is partially offset by state-provided healthcare coverage–could send taxpayers racing to the exits.”

    Californians would be able to access government-run healthcare through taxes. This would, according to supporters, offset higher taxes and save money over the long term.

    Gov. Gavin Newsom is a Democrat. He has stated that he has supported single-payer healthcare in the past but has not commented on this particular proposal. Assemblyman Ash Kalra sponsored Assembly Bill 1400.