(March 8, 2005) California Chamber-opposed legislation to increase the maximum tax rates was heard in the Assembly Revenue and Taxation Committee yesterday.

AB 6 (Chan; D-Oakland /Vargas; D- San Diego) increases the tax burden on small and medium-sized businesses by increasing the maximum tax rates to 10 and 11 percent and the alternative tax rate to 8.5 percent.

Many of California’s small and medium-sized businesses report their income and pay their tax liability on personal income tax returns.  Increasing the maximum rates for personal income tax to 10 and 11 percent is a direct increase in costs for these businesses.

The Chamber believes that increasing taxes on small and medium-sized businesses will not address or resolve California’s current budget crisis.  California is already the most expensive state in the country in which to do business. AB 6 will make it even more expensive to do business in the state at a time when California’s policymakers should focus on economic growth and creating jobs.

Taxes are 19 percent higher in California than the average taxes in the other western states, according to a survey conducted last year by Bain and Company, on behalf of the California Business Roundtable. 

Not enough has been done to address the important cost drivers that make California the most expensive state in which to do business. The appropriate and prudent way in which the state can take control of its budget crisis is by curbing spending not by increasing taxes.

The Assembly Revenue and Taxation Committee placed AB 6 on the suspense file at yesterday’s hearing. The Chamber is urging all employers to write letters to the committee opposing AB 6.

For more information on AB 6 or other Chamber-opposed bills, please visit the Chamber website at www.calchamber.com.