California Democratic lawmakers presented a plan earlier in the week to help reduce the state’s budget deficit that has soared to over $15 billion. Most of the revenue would come from tax hikes that would affect the richest Californian taxpayers the hardest. Conservative lawmakers, on the other hand, fear that these taxes would encourage wealthy individuals and business owners to move out of the state. Below are the details of the tax increases thanks to SFGate.com.
1. Income tax on wealthy
Additional Revenue: $5.6 billion
Who Pays: The state income tax rate for joint filers whose taxable income is above $321,000 is now 9.3 percent. The Democrats' proposal would increase the rate to 10 percent for joint filers who earn at least $321,000 and 11 percent for those who earn more than $642,000.
2. Deductions on net losses
Additional Revenue: $1.1 billion
Who Pays: Suspends the deduction for net operation losses for corporations. Companies that experience a loss now are allowed to take a deduction for the same amount in the following year.
3. Suspend tax adjustments
Additional Revenue: $815 million
Who Pays: Suspends certain tax adjustments for all income brackets, resulting in a slight increase of income taxes for all individual taxpayers. Higher-income taxpayers would pay more income taxes. For example, a taxpayer whose taxable income is $50,000 would see an increase of about $34 a year, while a person whose income is $97,000 would pay about $180 more.
4. Corporate tax
Additional Revenue: $470 million
Who Pays: The top corporate tax rate would be increased from 8.84 percent to 9.3 percent. Democrats say the change would restore the top rate to what it was before being reduced in 1997.
5. Dependent credit
Additional Revenue: $215 million
Who Pays: The dependent credit for taxpayers whose adjusted gross income is more than $150,000 would be reduced from $294 per child to $94 per child.
6. Tax amnesty
Additional Revenue: $1.5 billion
Who Pays: Institute an amnesty program that allows individuals and companies that have fallen behind on their tax payments to pay them without penalty.