California Doubling Taxes
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California is on the way to doubling its residents’ already high tax burden. The proposed constitutional revision (ACA 11 2024) to the state tax code is projected to increase taxes by roughly $12,000 per household.
The reason for this proposed tax hike is to gather enough funds for CalCare, California’s planned single-payer health care system. It isn’t just the California tax brackets that would see an increase, though. There is also the tax on wages that increase to 18.05 percent.
In addition to this, California will introduce a gross receipts tax (GST), which would tax businesses based on their gross income, not taxable. The rate for the GST is anticipated to be 2.3 percent. However, this would exclude a business’ first $2 million in gross receipts.
Here is everything that California is planning to do to double its taxes in detail.
Payroll taxes
Currently, California has the following payroll taxes.
- Unemployment Insurance Tax
- Employment Training Tax
- State Disability Insurance Tax
- California Personal Insurance Tax
On top of these, a new payroll tax will be collected from wages over $49,990 from employers.
This new payroll tax won’t apply to businesses with fewer than 50 employees where it brings controversy, and it’s something that policymakers need a more comprehensive look at.
Because it only applies to employers with 50 or more employees, hiring one more employee when you have 49 will mean paying more in this additional payroll tax than paying the salary. If the new tax law remains the way it is, it could be seen as a punishment to small businesses for expanding their operations.
Gross receipt tax – GST
Businesses with over $2 million in turnover will start paying 2.3 percent GST tax. This tax won’t apply to the first $2 million; for example, a business with a gross sales of $3 million will pay the 2.3 percent tax on the amounts exceeding the threshold.
Note that this is on top of the 8.84 percent corporate tax.
California increased tax brackets
| Marginal Tax Rate | Single/Married Filing Separately/Head of Household | Married Filing Jointly/Qualifying Widow(er) |
|---|---|---|
| 2.25% | $0 | $0 |
| 3.25% | $9,324 | $18,649 |
| 5.25% | $22,106 | $44,213 |
| 7.25% | $34,891 | $69,783 |
| 9.25% | $48,434 | $96,869 |
| 10.25% | $49,900 | $99,800 |
| 11.55% | $61,213 | $122,427 |
| 12.05% | $149,509 | $149,509 |
| 12.55% | $299,509 | $299,509 |
| 13.05% | — | $599,013 |
| 13.55% | $312,865 | — |
| 14.05% | — | $625,371 |
| 14.55% | $375,220 | — |
| 15.05% | $599,013 | $750,441 |
| 16.05% | $625,368 | $1,000,000 |
| 17.05% | $1,000,000 | $1,250,737 |
| 17.30% | $1,299,500 | $1,299,500 |
| 18.05% | $2,484,121 | $2,484,121 |
Here are the current tax brackets for comparison.
| Tax rate | Single, married filing separate | Married filing jointly |
| 1.0% | $0 – $9,324 | $0 – $18,649 |
| 2.0% | $,325 – $22,106 | $18,650 – $44,213 |
| 4.0% | $22,107 – $34,891 | $44,214 – $69,783 |
| 6.0% | $34,892 – $48,434 | $69,784 – $96,869 |
| 8.0% | $48,435 – $61,213 | $96,870 – $122,427 |
| 9.3% | $61,214 – $312,685 | $122,428 – $625,371 |
| 10.3% | $312,686 – $375,220 | $624,372 – $750,441 |
| 11.3% | $375,221 – $625,368 | $750,442 – $1,250,737 |
| 12.3% | $625,369 or more | $1,250,738 or more |
When is California doubling taxes?
Assuming it’s accepted, these new taxes and the increased rates will come into effect right away, starting from 2024. Some of the details in the newly introduced amendment may take time to get into order, but overall, most of the changes can take into effect and will if passed.
Why is California doubling taxes?
The main reason for the tax increases is to fund the state’s own single-payer health care system that requires additional funding. The newly introduced tax changes are anticipated to raise an extra $163 billion in funds for this. If everything goes according to the plan, California may have the most advanced health care system in all of the United States, but its cost is what makes a lot of finance experts question.
