July 11, 2008

Democrats Propose Higher Taxes on Business

The Democratic majority on the Legislature’s joint budget conference committee this week proposed billions of dollars in tax increases on business.

The proposal includes increasing the corporate tax rate from 8.8 percent to 9.3 percent; eliminating for three years the ability to deduct net operating losses; boosting the tax rate for annual incomes above $321,000 (an increase affecting all business owners and professionals who file personal rather than corporate taxes); and no longer indexing state income tax brackets to inflation.

News reports quote Republicans as reiterating their opposition to tax hikes, pointing out that the increases will drive businesses out of state and hurt families already bearing the brunt of the economic slowdown. Any tax hikes (and the budget plan) must be approved by a two-thirds vote of the Legislature, which would include Republicans.

In response to reporters’ questions, Governor Arnold Schwarzenegger said he is open-minded but against tax increases.

The next stop for the plan is a vote by the full Assembly and Senate.

The CalChamber is encouraging members to let legislators know a tax hike would have a harmful impact on California’s chances for economic recovery.