(HorizonPost.com) – California Governor Gavin Newsom’s latest budget proposal includes $18 billion in “temporary” business tax increases, despite his assurances earlier this month that he would not raise taxes to address the state’s budget shortfall.
Newsom unveiled his budget proposal on May 10 and pledged at the time that he would not raise taxes to close California’s budget deficit.
When asked if he would he would sign a budget that included tax increases, Newsom assured reporters that the “answer is no.” Newsom said there was no “real evidence and need” to increase taxes, adding that a budget that included tax increases would be an “absolute non-starter.”
However, the budget proposal includes provisions that would prevent businesses that earn more than $1 million from deducting operating losses from their state taxes for three years, which would effectively cost California businesses roughly $18 billion in taxes. The proposal would also suspend existing tax credits for California businesses.
H.D. Palmer, a spokesman for California’s finance department said the provisions were meant to “protect small businesses” and would only impact a small percentage of businesses in the state.
David Kline from the California Taxpayers Association, however, argued that the provisions would only make the state’s economic situation worse.
Kline noted that the unemployment rate in California is the highest in the country. He said between the skyrocketing cost of living and a scheduled increase in the gas tax, now would be “the worst possible time” to impose an additional $18 billion in taxes on businesses as it would lead to even higher consumer prices and more job losses.
During the first quarter of 2024, nearly 500,000 California residents lost their jobs.
Howard Jarvis Taxpayers Association President Jon Coupal blasted Newsom for “playing a risky game with people’s jobs” and further adding to the state’s economic uncertainty.
Coupal said suspending the tax credits and the deductions for net operating losses would send the message that the state might “yank the rug out” from under businesses every time California’s budget is stressed, even “by reckless government spending.”
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