California is offering to split the federal tax savings with local corporations, but it's hard to see why that's a good deal unless your business needs to be in California.
Trump's plan reduced the federal corporate tax rate from 35 percent to 21 percent, which Republican and business leaders hailed as an incentive for a surge of capital investment and job growth. But Democrats denounced the change as a giveaway to the wealthy that would grow the national debt and require future cuts to welfare programs such as Medicaid.The proposal from McCarty and Ting creates a new tax for businesses in California, which already has a state corporate tax rate of 8.84 percent. Companies with annual net income of more than $1 million in California would pay an additional surcharge of 7 percent, or half their savings from the recent federal tax cut.
If approved by two-thirds of the Legislature, Assembly Constitutional Amendment 22 would go before the voters for final consideration. Proponents estimate it would raise between $15 billion and $17 billion a year, which would be directed toward funding for education, college affordability initiatives, child care and preschool slots, taxpayer rebates and an expansion of California's Earned Income Tax Credit.
The $15 - $17 billion estimate is a static analysis that doesn't take into account the likelihood that some businesses will reduce their footprint in California, or just leave. Reducing the federal rate means that a company doesn't have to leave the country to benefit, it only has to leave California.
