California Lawmakers Pass Tax Change to Help Working Poor
Friday, June 21, 2019
California lawmakers have agreed to reduce business tax write-offs to raise more than a billion dollars a year to pay for an expanded tax credit for the working poor.
The bill, AB91, realigns California’s tax code to match some changes made by President Trump’s 2017 federal tax overhaul. The Assembly passed it by a bipartisan vote of 59-2.
It was approved by the state Senate earlier this week and now heads to Gov. Gavin Newsom, who proposed the package in his January budget plan.
In a statement, Newsom praised the “good economic policy that puts more than a billion dollars back in the pockets of working families and small business operators throughout California.”
The bill will remove the ability for wealthy households to deduct business losses and defer taxes owed on the sale of personal property, and makes other changes aimed mostly at large corporations.
The new revenue will make the state’s earned income tax credit available to 1 million additional low-income Californians, who could apply for money back on their taxes if they make less than $30,000 a year.
“They have to choose between keeping the lights on and putting food on the table. They lie awake at night worried about paying the rent,” said Assemblywoman Autumn Burke, D-Marina Del Rey (Los Angeles County). “They need this help and they work every day to earn it.”
Despite Republican criticism that the measure selectively changes the state law to increase taxes on businesses, four GOP members of the Assembly joined their Democratic colleagues to support AB91.
Six Democrats from wealthy districts, including Assemblymembers Marc Berman of Palo Alto and Rebecca Bauer-Kahan of Orinda, did not vote. Four of them, including Bauer-Kahan, won seats in November that were previously held by Republicans. Another, Assemblyman Brian Maienschein of San Diego, is a former Republican who switched parties in January after narrowly winning re-election.
Frustration over the Trump tax law, which capped state and local tax deductions, helped power a Democratic wave in California last fall. One of the members swept into the Assembly on that momentum, Cottie Petrie-Norris of Laguna Beach (Orange County), previously said that she worried that further changes to state tax write-offs would be another financial knock to her constituents. She also did not vote.
Assemblywoman Eloise Reyes, D-Grand Terrace (San Bernardino County), noted that noncitizen filers were excluded from eligibility for the tax credit. The Assembly and Senate had included them in earlier versions of the bill, but they were removed in negotiations with the Newsom administration, which cited the cost of opening the program to visa holders and other noncitizens who pay taxes.
“They play a significant role in their local economies, yet they do not have access to critical services,” Reyes said. “We should support all families and not shortchange low-income households across California.”
Newsom scored another victory when the state Senate approved a new fee on phone bills to update the state’s emergency communications system. The Legislature had rebuffed the proposal when former Gov. Jerry Brown tried to do it last year, but some lawmakers changed their minds after 2018’s devastating fire season.
The Assembly previously passed the measure, which now heads to the governor’s desk.