California Democrats’ Reaction to Federal Corporate Rate Reduction

In response to the federal corporate tax rate reduction to 21%, two Democratic assemblymen, Kevin McCarty and Phil Ting, introduced Assembly Constitutional Amendment 22 (“ACA-22”) that would impose a 10% surcharge on qualified corporate net income over $1,000,000 effective for taxable years beginning on or after January 1, 2018.  This bill, if enacted, will effectively increase marginal California corporate tax rate from 8.84% to 18.84%.

McCarty and Ting believe that the recently enacted federal tax laws, including corporate tax rate reduction, favors billionaires over middle-class workers, and they are introducing ACA-22 to share with ordinary California taxpayers the economic gains provided by federal income tax cuts for corporations.

The 10% surcharge is believed to cause some businesses to migrate out of the state and companies might be less inclined to make investment in the state.  For these reasons, despite the fact that California is a liberal state, ACA-22 faces an uphill battle.  To be signed into law, the bill must be approved in both houses of Legislature and, if passed, would also need voter approval.

For the reference, here is a link to ACA-22.
http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180ACA22