Legislative Update - June 5, 2020
Last Friday, the Senate passed two budget proposals that CSEA had been monitoring due to their important tax implications.
The first proposal, which would save the state an estimated $1.8 billion, suspends net operating loss deductions for businesses with income over $1 million for 2020, 2021, and 2022.
The second proposal limits the use of business incentive tax credits to offset no more than $5 million in tax liability for 2020, 2021 and 2022. This is estimated to save the state $2 billion. The Senate and House also rejected Governor Newsom’s proposal to force state workers to take a pay cut this summer to help the recovery effort.
In other legislative news, AB 398, The Local Government and School Recovery Relief Act, is a recently amended bill that may soon be making headlines. AB 398 would require businesses with 500 or more employees to pay a tax of $275 per employee from January 2021 to January 2026.
According to CSEA’s Legislative Advocate, Jennifer Tannehill, the majority party in the legislature is averse to making cuts during the pandemic. They are seeking revenue sources, so any possible deal may include a similar tax increase. Additionally, this year’s budget process is more opaque than usual given that the pandemic has upended the legislative calendar, so including this bill in a budget trailer bill at some point is possible as well.
CSEA generally does not take positions on tax increases or bills that pick winners or losers, because it is important to maintain our status among legislators as non-partisan tax experts. We will continue to keep you apprised of any big developments.