On the positive side, things could have been much worse in terms of proposed tax increases. A number of proposals already have been rejected.
• Initiative 21-0038A1, which was (also) known as “The Clean Cars and Clean Air Act,” would have increased the California corporate tax rate by 2.45% on income in excess of $20 million, or would have eliminated the corporate “water’s-edge” election and required corporations to file returns using the worldwide unitary method. That initiative proposal was withdrawn on January 24.
• Assembly Bill 1400 proposed a state government-run healthcare program that had an estimated cost of $366 billion per year. The funding mechanism for the proposal was found separately in ACA 11, which proposed a 2.4% gross receipts tax on businesses, a 1.25% payroll tax on employers, and escalating personal income tax increases beginning with a 0.5% rate for taxable income of $149,509 and going to a 2.5% rate increase for taxable income at $2,484,121 and above. AB 1400 died in the Legislature on January 3lst (also stopping ACA 11 in its tracks).
• Assembly Bill 1638 would have imposed a form of Windfall Profits Tax on oil production in California. The bill died in the Legislature in early April.
Eric J. Coffill is a senior counsel at Eversheds Sutherland (U.S.) LLP.