Greater Irvine Chamber Advocates Against Proposal for Increased Taxes on Business
Tuesday, October 19, 2021
The Greater Irvine Chamber joins a coalition of influential organizations to reject proposals in Congress to increase taxes on large and small businesses to pay for the massive multi-trillion-dollar reconciliation package.
“The Greater Irvine Chamber opposes legislation that would further burden California businesses as they are in the recovery and rebuilding phase following a devastating 18 months of economic setbacks caused by the COVID-19 pandemic,” said Bryan Starr, president and CEO, Greater Irvine Chamber. “With California’s position as the fifth-largest economy in the world, a healthy business climate in state ensures a stable economy for the nation and the world.”
With a state corporate tax rate of 8.84%, the current proposal to increase the federal corporate rate from 21% to 26.5% will result in California corporations paying a combined rate of over 33% - that’s roughly ten points higher than the weighted average rate of every other developed nation on Earth. Our rate would be eight points higher than China and nearly 11 points higher than the average rate in the European Union. In other words, the proposal to increase the federal corporate tax rate will put California corporations at a severe competitive disadvantage.
California residents are not immune from the effects of higher corporate taxes. Millions of residential utility ratepayers will see higher utility bills from increased taxes levied on gas and electric utilities. Utility providers regulated by the California Public Utilities Commission must pass along the increased costs resulting from higher taxes directly to consumers.
Congress is also considering significant tax increases on the pass-through business sector, including raising the top individual tax rate, lowering the top rate’s threshold, imposing the 3.8% Net Investment Income Tax (NIIT) to all forms of business income, and capping the 199A deduction.
Coupled with California’s top-heavy income tax, this package of rate hikes would increase the top rate on our state’s pass-through businesses to over 50% of their taxable income.
Additionally, Congress is considering raising the capital gains tax to 25%. When factoring in California’s own taxes on capital gains, most investors in the state will end up paying a combined capital gains rate of over 35%. The rate increase will affect approximately two-thirds of capital investment in the U.S. and could dampen investments in California start-ups and hurt California families as they save for retirement or look to buy a new home.
Many California employers are vulnerable as they continue to rebuild and recover from the pandemic. The tax increases included in the reconciliation package will further cloud California’s difficult business climate and stifle job growth at a time when it is desperately needed.
Category: Legislative News, California, Greater Irvine Chamber, Bryan Starr, Taxes