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Promoting Racial Equity Through California’s Tax and Revenue Policies

Legacies of historical racist policies and ongoing discrimination in areas such as education, employment, and housing have barred many Californians of color from economic opportunities. As a result, Californians of color — particularly Black, Latinx, and American Indian Californians — are less likely to have high incomes and to have built enough wealth to be able to weather periods of income loss, retire comfortably, and pass on wealth to their children. These barriers have also made Californians of color more likely to have experienced health and economic consequences of the COVID-19 crisis. One area policymakers should consider in efforts to address these inequities is the state’s tax and revenue policies. Although these policies may appear race-neutral, they can play a significant role in either worsening existing racial and ethnic income and wealth disparities or promoting greater equity for Californians.

Taxes & Revenue

American Rescue Plan Provides Assistance to Millions of Californians

On March 12, President Biden signed the American Rescue Plan (ARP) Act to provide much needed assistance to tens of millions of people, including millions of Californians. The $1.9 trillion federal aid package will bring approximately $150 billion in federal aid to California to help reduce economic hardship for low- and middle-income households, support workers, help schools address learning needs, boost early care and learning, combat housing instability and homelessness, and bolster the economy. This latest round of federal fiscal relief will help reduce hardship as a result of the pandemic, particularly for Californians with low incomes and people of color, and begins to set the stage for a more equitable economic recovery. This report outlines key provisions of the plan and what it means for Californians.

California Budget

State Stimulus Can Support Californians with Low Incomes

Governor Newsom’s proposed Golden State Stimulus directs $600 payments to tax filers eligible for the CalEITC. Many of these Californians work in low-wage positions in industries that have been hit hard by COVID-19 job losses.

The Budget Center’s First Look: Governor’s Proposed 2021-22 Budget

On January 8, Governor Gavin Newsom released his proposed 2021-22 state budget, drawing on stronger-than-expected revenues to call for a series of emergency investments to respond to the public health and economic impacts of the pandemic and provide modest relief for Californians. These much-needed emergency investments, which the governor calls for the Legislature to enact as quickly as possible in the coming weeks, include providing $600 in one-time assistance for Californians with low incomes, extending the state’s eviction moratorium, putting steps in place to reopen schools, and providing small business assistance through loans and tax credits.

California Budget

First Look: A Budget Center Analysis of California’s 2020-21 State Budget

The 2020-21 California state budget put forward by state leaders recognizes the challenges the state faces and meets state leaders’ Constitutional obligation to enact a balanced budget, the spending plan fails to meet many of the most urgent and basic needs of Californians: ensuring they can safely earn a living in healthy environments and provide food, housing, and health care for their families. Without bolder action, including raising additional revenues and pursuing appropriate borrowing, the enacted 2020-21 budget will exacerbate income and wealth inequality and systemic inequities that permanently leave Californians of color, undocumented residents, and households with low incomes locked out of our state’s prosperity.

California Budget

New Report Finds Corporations Pay Far Less of Their California Income in State Taxes Than a Generation Ago

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.

Corporations Pay Less of Their State Income in Taxes Than a Generation Ago

The share of California corporate income paid in state taxes declined by more than half during the past three decades. In the early 1980s, corporations that reported profits in California paid more than 9.5% of this income in state corporation taxes. In contrast, corporations paid just 4.2% of their California profits in corporation taxes in 2017, the most recent year for which data are available. 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 – more than the state spends on the University of California, the California State University, and student aid combined. Corporations pay less of their income in taxes today - even amid the COVID-19 economic crisis - than they did in the 1980s in part due to the reduction of tax rates by state policymakers.

Taxes & Revenue

First Look: Governor Confronts Unprecedented Challenges Amid COVID-19

On May 14, 2020, Governor Gavin Newsom released the May Revision to his proposed 2020-21 state budget. Our state is facing unprecedented challenges as a result of the COVID-19 crisis – an estimated $54 billion state budget shortfall for the current (2019-20) and next (2020-21) fiscal years, a rapid increase in unemployment, and millions of Californians in need of assistance as they confront new challenges to paying rent, buying groceries, and covering the costs of basic needs. The health and economic hardships are especially striking for Black and Latinx Californians, women and children in low-income households, and undocumented Californians. This First Look report summarizes key provisions of the Governor’s May Revision.

California Budget