(May 24, 2005) California Chamber of Commerce-opposed legislation to increase personal income tax rates was passed last week by the Assembly Revenue and Taxation Committee.

AB 6 (Chan; D-Oakland), as originally introduced, increased the tax burden on small business by increasing the personal income tax rate to 10 and 11 percent and the alternative tax rate to 8.5 percent.

“In order to move the bill out of committee, the bill was amended to take out the rate increases,” said Erika Frank, Chamber legislative advocate and general counsel.  “The bill still states the Legislature’s intent to increase personal income tax rates; the question now is by how much. The Chamber will continue to oppose this bill because any increase to the tax rate will be a burden on California businesses.”

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 is a direct increase in costs to these businesses. 

The Chamber believes that increasing taxes on small and medium-sized businesses will not address or resolve California’s budget crisis. California is already the most expensive state in the country in which to do business.

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 for the California Business Roundtable.

AB 6 will make it even more expensive to do business here at a time when California’s policymakers should focus on economic growth and job creation.

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.

Key Vote
The “intent” form of AB 6 was passed in intent form by the Assembly Revenue and Taxation Committee by a 4-3 vote. The bill will likely be up for consideration by the Assembly Appropriations Committee on May 25.

Ayes: Klehs (D-Castro Valley); Chu (D-Monterey Park); Jones (D-Sacramento); Lieber (D-Mountain View).

Noes: Walters (R-Laguna Niguel); Canciamilla (D-Pittsburg); DeVore (R-Irvine).

Action Needed
The Chamber is urging all employers to write letters in opposition to AB 6 to members of the Assembly Appropriations Committee.  A sample letter is available on the chamber’s website.

For more information on AB 6 or to view the entire “job killer” list, please visit the Chamber’s website at www.calchamber.com/jobkillers.