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Is it time to raise taxes on the rich? California Democrats call for new millionaire's tax

Mackenzie Hawkins and Hannah Wiley, The Sacramento Bee on

Published in News & Features

SACRAMENTO, Calif. -- California's wealthiest households pay the highest income tax rate in the country. It could go up a few more percentage points if Democrats follow through next year on a new proposal that would levy on a new millionaire's tax for seven-figure earners.

The concept has support from some of the state's biggest public employee unions and Democrats in the Legislature. They argue the money is needed to support schools and government agencies that are charged with providing services to unemployed and struggling Californians.

"We're actually talking about folks who are doing extremely well in the state of California, while the rest of California hurts," said Assemblyman Miguel Santiago, D-Los Angeles. "There are some who are doing everything they possibly can and they just can't make it work because the jobs are no longer available, the rent keeps increasing and it's very difficult to put groceries on the table."

California millionaires pay a 13.3% income tax rate, the highest marginal tax rate in the country, according to the Tax Foundation.

Assembly Bill 1253 would bump the rate by imposing three new surcharges on the state's highest earners: 1% for taxable incomes over $1 million, 3% for incomes over $2 million and 3.5% for incomes over $5 million, meaning California's wealthiest could pay 16.8% on their taxable income.

Combined with federal income tax, top earners would pay 53.8% of earnings above $5 million to the IRS and the state.


The increase would apply to any income earned after Jan. 1 of this year. Tax filings next April would reflect the new rate. The legislation is projected to generate $6.8 billion next year, according to a labor union analysis cited by Santiago's staff.

Santiago, a Los Angeles Democrat, said during a Monday committee hearing that AB 1253 would urge wealthier Californians to "pay their fair share" during an unprecedented crisis that's rocked low-income communities of color financially hard hit by COVID-19.

California's unemployment rate has surged to 14.9%, surpassing jobless numbers recorded during the Great Recession. Latinos comprise more than half of California's COVID-19 positive cases.

"We need a plan for a safe and equitable recovery, backed by real revenue," said April Verett, president of SEIU Local 2015. "COVID-19 continues to spread, pushing millions of Californians over the edge of financial disaster. A catastrophe awaits us. Our leaders must act with decisiveness and courage. We cannot afford the luxury of delay.


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