California legislature wants 47% corporate tax increase & cap on CEO pay

CATaxIncreasesEditorialBy George Miller

CATaxIncreasesYeah, you read that right. The state that passed the largest tax increase in history not so long ago, now wants to increase the corporate tax rate by …. 47%. This would apply to the same corporations already running for the exits, or they may be trying to find them if they haven’t already. California has one of the highest corporate tax burdens in the  nation with a combined federal/state tax load of  up to 43.84%. It also has one of the highest flight rates- to Texas, offshore, deep South, etc.  Income tax on “C” corps and LLC’s electing to be treated as corporations is now  8.84%, with a proposed increase to 13%. The State Senate  is now considering SB1372 which would do just that. Oh, did I mention that our Senate geniuses, at least those who haven’t yet been suspended, also want to put a cap on a CEO’s pay?  Is that even constitutional, not that’s ever an impediment.

Per, California has a franchise tax, a corporate income tax, and an alternative minimum tax (currently  6.65%). A business may be subject to one or more of these taxes based on both its amount of taxable income and its legal form.

There are some loopholes, via  S corporations, most limited liability companies (LLCs),partnerships, and sole proprietorships, which  are subject to a state’s tax on personal income.  “C” Corporations levy the tax once on the corporation, then again on profit distribution via personal income tax.

By spending more for services, entitlements and inefficiency, while inflation also increases costs, the state is forced to tax and borrow more to met the obligations incurred by these policies. Although these taxes are applied to companies and not individuals, companies are collectively owned by individuals.  Companies will likely attempt to recover the higher taxes through higher prices they charge, which may also make them less competitive and less able to expand and react to problems. Or they may leave, contract in size,  or go out of business.

Does this sound like a “business friendly” climate? Do the Governor, legislators and bureaucrats think that this will encourage businesses to locate here, invest and expand?  How will tax revenues be raised if the most productive people and businesses don’t wish to bear these costs and continue to leave, despite the state’s enviable climate, geography, strategic Pacific Rim siting and amenities?  Where will the jobs come from? Californians do you want to continue to elect people who will do this to your state?  Is it worth it to you to meet social objectives set by our leaders and so far supported by the voters and taxpayers?  Will it even be possible to meet them in this manner? Just asking.

California already is ranked by some as  the 50th worst state for doing business in and is much worse than many foreign competitors.

Good articles for reference:

Track the bill- SB1372:


George Miller is Publisher of and a “retired” operations management consultant, active in civic affairs, living in Oxnard.

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