The liberal legislature of California has long been known for their ability to rebel against any thought the Republican party holds. However, in an effort to give its people more money in their state tax refunds each year, the state will have to agree, at least in part, with President Donald Trump’s recent tax laws.
Gavin Newsom, the Democratic governor of California, has recently proposed a new state spending plan that would give people who earn less than $30,000 a year and have at least one child under six at least an extra $1000 each year.
However, this triples the amount the state will spend on its earned income tax credit, bringing it to around $1.2 billion. And while this means at least 1 million more households would be eligible to receive such benefits, it also means the state would need to find ways to pay for such an increase in spending.
In preparation for the possible changes, lawmakers sent a budget plan to the Governor that includes the proposed expansion of California’s income tax credit. However, until they find other funding, there remains a large hole in the $214.8 billion operating budget.
One such way and the most realistic at this point is to adopt part of President Trump’s 2017 tax laws. When the federal tax changes were made in 2017, nearly all Democrats protested them vehemently, especially California.
Trump’s law caps the amount of state and local deductions, which California believes to be a direct attack against high-income, high-taxed states such as themselves.
Democrat Assembly Majority Leader Ian Calderon says, “You have a federal tax law that was passed with the intention, in our opinion, to harm California. They don’t like who we are; they don’t like our politics; they don’t like what we represent. It’s been difficult for us to kind of get to a position where we are comfortable with conforming to a law that really, in its conception, was meant to harm us as a state.”
However, the assembly seems to be at odds over the issue.
Many would agree with the governor’s new plan, as it would not include all of Trump’s changes but only some that affect business income. Some of those changes would increase taxes, while others would lower them. At the end of the day, the changes would give the state an additional $1.8 billion according to the California Department of Finance.
Mike Herold, the director of policy advocacy for the Western Center on Law and Poverty, says, “The Trump administration got rid of these loopholes at the federal level to be able to provide a deeper tax cut to corporate America.” He continued with, “We’re flipping that on its head. Instead, we’re going to use the same money … to help people who need it the most. I think most of the progressive liberal members of the Legislature are completely comfortable with that.”
Senator Toni Atkins also agrees with the policy changes. Atkins is the Senate’s top leader and a San Diego Democrat. She says,” my colleagues want to see this done, “and that these tax changes are “really important.”
She went on to say, “Sometimes taking the political perspective is not practical for what you need to do on the ground.” She also stated, “When someone tells me this can support small businesses in the state of California, you know, I’m all for it.”
But many assembly members are concerned about the effects such deductions may have on local small businesses. According to Newsom, the new tax changes would include cutting some benefits deductions such as being able to write off courtside seats at Sacramento Kings games. But for small business who use such deductions regularly, it could be detrimental.
Calderon says, “There is zero trust in just conforming blindly to anything in their proposal without thoroughly understanding what exactly we know we’re signing onto.