If you make more than a million dollars in a given year, your California income taxes are going up. California’s personal income tax is already the highest in the country. If you thought they couldn’t go any higher, meet Assembly Bill 1253. Introduced by Miguel Santiago, D-Los Angeles, AB1253 would increase California’s personal income taxes in the following ways:
- A 1% increase in taxes for California Adjusted Gross Income (AGI) between $1 million to $2 million. The new tax rate for income between $1M – $2M would be 14.3%.
- A 3% increase in taxes for CA AGI between $2 million to $5 million. The new tax rate for income between $2M – $5M would be 16.3%.
- A 3.5% increase in taxes for CA AGI above $5 million. The new tax rate for income above $5 million would be 16.8%.
What’s worse is that the adjustments in tax rates would be retroactive to apply to the entire year of 2020. This is like the rules changing during a basketball game and getting retroactively fouled-out for acts that were not fouls under the then-current rules. If you’re affected by the tax increases, then you’d also be significantly affected by the changes proposed under the Biden Tax Policy. Let’s also not forget that the differences in state and Federal tax laws (depreciation, charitable donation deductions, etc.) often result in higher taxable income at the state level.
As of the date of this blog entry, there are many other proposals at both the state and local levels in California that would substantially increase the tax burden of those with substantial income or assets, and businesses of all sizes. AB1253 is just one of them. This is the first entry in a blog series that we are dubbing, “California Taxes in Focus,” where we will be exploring these proposed tax increases.
We understand that the California is facing exacerbated budget issues as a result of the Pandemic. Taxing job creators and investors out of the state, however, is not going to fix the problem. The pandemic has made businesses (and people, in general) more mobile than ever. For decades, California has relied on its nearly perfect climate, concentration of talent, and overall economy to be able to levy the most burdensome taxes in the nation. In a post-COVID world, this isn’t going to be enough. If you care about California’s future, the time to make your voice heard is now. Otherwise, taxes will go up and intellectual and financial assets will leave the state.
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