High-end luxury shops and businesses on Rodeo Drive in the Beverly Hills business district of Los Angeles, California, United States. Rodeo Drive is a famous high-end shopping street that offers a variety of renowned designer shops, hotels and restaurants. Beverly Hills is a city in the Los Angeles County of California and home to many Hollywood movie stars.
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A proposal to increase taxes on California millionaires would result in a maximum tax rate of nearly 54% for federal and state taxes.
Democrats in the California state legislature this week proposed a tax increase for the highest earners in the state to help pay for schools and services affected by the coronavirus pandemic. Lawmakers say the tax increase would raise more than $ 6 billion a year and redirect funds from the wealthy to those most affected by the Covid-19 crisis.
The plan follows proposals in New York state to raise taxes on the wealthy to pay for a growing budget deficit. And it adds to a growing debate about the spread of inequality during the pandemic and who should pay the high costs to the government.
However, California’s proposal would further raise the nation’s highest state tax rate and renew the possibility of wealthy Californians fleeing the state.
California’s maximum marginal tax rate is 13.3%. The new proposal would add three new surcharges to seven-figure employees. I would add a 1% surcharge to gross income of more than $ 1 million, 3% on income greater than $ 2 million, and 3.5% on income greater than $ 5 million.
Therefore, the maximum tax rate would be 16.8%, with incomes of more than $ 5 million, and the combined state and federal tax rate for the highest earners in California would rise to 53.8%. With the state and local tax deduction limited to $ 10,000 under Trump’s tax cuts, higher-income Californians would not be able to deduct the new taxes from their federal returns.
The tax would only affect 0.5% of California taxpayers. But that small group of super winners, many of them in technology, pay 40% of the state’s tax revenue, according to the California Franchise Tax Board. The new tax rate would also apply to capital gains, which account for a large portion of technology income, since California taxes capital gains at the same rates as ordinary income.
With many technology companies now allowing executives to work remotely for the next year, those who earn the most could leave the state and work in places without income taxes, like Nevada and Texas. If the new tax is approved in August, it would be retroactive to this year and would apply to income earned since January 2020.
“Tax increases would be the turning point for many taxpayers,” said Robert Gutierrez, president of the California Taxpayers Association, which advocates lower taxes, “prompting them to book a one-way trip to one of the 49 states with lower taxes. ” “
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