On January 5, members of the California Congregation introduced Congregation Amendment (ACA) 11. The bill would introduce both a new excise tax and a new payroll tax, and increase income tax rates to fund universal health insurance for sole wage earners and a health expense control system for citizens. These new taxes are estimated to generate nearly $ 163 billion in revenue per year and would represent one of the largest tax increases in the state’s history.
The bill’s excise tax would impose a rate of 2.3% on gross income of over $ 2 million for all eligible California businesses. Payroll tax would be imposed at 1.25% of employee wages on employers with 50 or more employees and 1% of wages on employees with annual income greater than $ 49,900. Finally, the bill would increase income tax on income over $ 149,509 at fixed rates to a new rate of 15.8% on income over $ 2,484,121 (the current law has a maximum rate of 13.3%).
However, ACA 11 faces numerous hurdles before its adoption. As a constitutional amendment, it must receive a two-thirds majority in both houses of the Legislature to be placed on the California ballot. If ACA 11 makes it to the election, it will then have to be approved by a majority of California’s voters. And while the governor would have no veto power over the change, the accompanying law introducing a payer healthcare system would require his approval. Given that California is already in a significant budget surplus and many state lawmakers are up for re-election in November, the massive tax hike proposed by ACA 11 is about to spike in 2022.