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California Gov. Gavin Newsom
Photo:
Ethan Swope/Associated Press
It’s hard to keep track of the bad policy emanating from California nowadays, and maybe that’s what Gov.
Gavin Newsom
was hoping when he signed legislation on Friday that raises the top marginal income-tax rate on the sly. High earners won’t know what hit them until it does.
The bill funds an expansion of the state’s paid family leave benefit by removing the $145,600 wage ceiling on the state’s 1.1% employee payroll tax. Workers can currently receive a 60% to 70% wage replacement to take up to eight weeks off to care for a new baby or sick family member. Starting in 2025, they will be eligible for between 70% and 90% of wages, more for lower earners.
The 1.1% payroll tax had been limited to $145,600 in wages since benefits are capped at $1,540 a week. That means high earners don’t receive a commensurately larger benefit. But in progressive fashion, Democrats are removing the tax ceiling and dunning higher earners to pay for a benefit expansion that will mainly benefit lower earners.
This means that in 2024 California’s top marginal tax rate will increase to 14.4% from 13.3% for workers making more than $1 million. Those making between $61,214 and $312,686 would pay 10.4%. So California’s upper-middle class will pay more than millionaires in almost every state save New York, New Jersey and Hawaii.
It gets worse. The state Employment Development Department says this tax increase “would not offset the additional benefit payments over time.” Under current law, the department can raise the payroll tax up to 1.5% to keep the special fund solvent. That means the tax could increase to 1.5% in coming years, and the Legislature may raise it even more when the taxes don’t match the generous leave benefit. You can count on that happening.
No-income-tax Florida and Texas are looking better all the time. So is Arizona, which is phasing in a 2.5% flat tax. Californians increasingly have to worry about getting mugged when they walk down city streets. Now the state is pick-pocketing them too.
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Appeared in the October 6, 2022, print edition.
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(This article is generated through the syndicated feeds, Financetin doesn’t own any part of this article)
