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SACRAMENTO – California’s state budget would have received $11.2 billion more revenue in 2017 had corporations paid the same share of their income in taxes that year as they did in 1981, according to a new report from the California Budget & Policy Center.

As California faces an estimated $54 billion budget shortfall and policymakers are charged with helping people in the ongoing COVID-19 health and economic crisis, there is a substantial need for new funding and resources. One place policymakers can immediately look: corporate taxes.

Corporations pay less of their income in state taxes today – even amid the COVID-19 economic crisis – than they did in the 1980s in part due to the reduction of tax rates and increased spending on tax breaks by state policymakers, according to the Budget Center’s new report.

Among other key findings in the report:

  • Since increasing the corporate tax rate to 9.6% in 1980, the Legislature has cut the rate twice – from 9.6% to 9.3% in 1987 and from 9.3% to 8.84% in 1997.
  • State policymakers have enacted several corporate tax breaks – many without expiration dates – adding up to $5.7 billion for corporations in 2019-20.
  • California spending on tax breaks for corporations far exceeds the amount the state spends on tax benefits for low-income Californians: In 2019, California was projected to spend just $1 billion on the state’s two largest tax credits targeted to Californians with low incomes – the California Earned Income Tax Credit (CalEITC) and the Young Child Tax Credit.
  • Corporations are also paying significantly less of their income in federal taxes due to the federal Tax Cuts and Jobs Act signed by President Trump in 2017.

As policymakers work toward not only a 2020-21 state budget agreement but also consider the ongoing needs of the COVID-19 crisis, they have an opportunity to consider how tax rates and tax credits, exemptions, and deductions could be altered to more equitably target funding and support to benefit all Californians.

“While the pandemic has dramatically altered our state’s economy, Californians, businesses, and corporations did not come into this crisis equally,” said Chris Hoene, Executive Director of the California Budget & Policy Center. “By increasing the taxes that corporations pay, the state would have more resources available to move California forward and support families with low incomes who are struggling to afford the costs of living in California, COVID-19 crisis or not.”

Read the full report here:


Learn more about the Budget Center’s findings and policy recommendations on economics, health, and COVID-19:

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