CalMatters explores how California's budget heavily depends on income taxes from wealthy individuals, leaving it vulnerable to fluctuations in their earnings. The article also discusses the potential impact of changes to federal tax laws on this revenue stream.
John Mahoney reviews a questionnaire for tax preparers in the AARP Foundation Tax-Aide program, in Oakland on Jan. 23, 2019. Photo By Paul Chinn, The San Francisco Chronicle via Getty Images
When the rich are getting richer, California sees multi-billion-dollar revenue windfalls. But downturns in their investments often result in sharp declines in tax receipts. In his budget, Newsom mentions the “swings in revenues and uncertainty that are a hallmark of California’s volatile tax system.”
With Donald Trump back in the White House, negotiations are underway on repeal or retention of a 2017 change in federal tax law that adversely affected states such as California and New York, whose budgets depend on taxing the incomes of the rich.Email addressThe change, part of a much larger overhaul of tax policy, limited deductions for state and local taxes – SALT in the political vernacular – on federal tax returns to $10,000.
CALIFORNIA BUDGET INCOME TAXES WEALTHY INDIVIDUALS FEDERAL TAX LAW SALT DEDUCTION
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