Please ensure Javascript is enabled for purposes of website accessibility

Construction of $200M Trump Ballroom at the White House to Begin in September

12 hours ago

US Senate Committee Backs $1 Billion for Ukraine in Pentagon Spending Bill

14 hours ago

Trump Says Mexico Trade Deal Extended for 90 Days

15 hours ago

Wall Street Jumps as Microsoft Enters $4 Trillion Club After Results

16 hours ago

Fresno Unified Trustee Susan Wittrup Responds to $162,000 Payout

1 day ago

Neptune to Launch a Creator-First, Customizable Algorithm Social Platform to Rival TikTok

1 day ago

Kamala Harris Will Not Run for Governor of California in 2026

1 day ago

Trump Pushes for Release of Epstein, Maxwell Grand Jury Testimony

2 days ago
Walters: Is Corporate Tax Hike Too Hot to Handle?
dan_walters
By Dan Walters, CalMatters Commentary
Published 4 years ago on
April 26, 2021

Share

Assembly Bill 71 is one of the year’s most contentious pieces of legislation —a hefty increase in corporate and personal income taxes to finance new efforts to end homelessness.

Assemblywoman Luz Rivas, an Arleta Democrat, is carrying the bill with backing from dozens of left-of-center social service organizations.

Dan Walters

Opinion

“Now is the time to take big, bold steps in addressing the number one policy issue Californians stress they want the Legislature to take action on,” Rivas said after the Assembly Revenue and Taxation Committee approved AB 71 last week. “Rural and urban local governments throughout the state need this financial support immediately to prevent this current crisis from becoming a full-blown catastrophe.”

However, an equally large number of business groups oppose the bill, citing recent corporate moves to Texas and saying it would encourage even more employers to shun high-cost California.

Disagreements About the Uncertainty of How Much Would be Raised

“The companies that remain will be placed at a tremendous competitive disadvantage,” the opposition coalition told legislators. “Their only response will be to reduce or not increase wages and benefits for their workers, and move new hires to lower cost jurisdictions to stay competitive.”

The disagreements extend to uncertainty over how much AB 71 would raise. Rivas says it could be “up to $1 billion a year,” opponents say it could be $2.4 billion a year and the state Franchise Tax Board puts it at $950 million for a couple of years, then dropping to $600 million.

The variation stems from the very complex nature of the legislation and the impossibility of calculating how corporations would react to undoing a major change in corporate tax policy enacted in 1986.

The Unitary Taxation Controversy

For many years, California utilized a “unitary” approach to taxing multinational corporations —requiring them to report their global earnings and, using a rigid formula, calculate how much should be attributed to California for taxation.

Foreign-based companies, especially those in Japan and the United Kingdom, hated the reporting requirements, which they regarded as intrusive, and pushed California to change it. The issue arose during Jerry Brown’s first governorship and initially he defended California’s system, only to do a 180-degree flip after visiting Japan.

Brown attributed his change of heart to “flaky data” from the Franchise Tax Board’s top executive, Martin Huff, but Huff publicly called Brown a liar. Huff had also angered legislators by saying their “per diem” expense payments should be taxed and eventually, Brown and legislators forced Huff to resign.

Meanwhile the unitary taxation controversy continued to simmer until Brown’s successor, Republican George Deukmejian, and the Legislature decreed in 1986 that corporations could opt to report data only on their California operations for taxation, known as a “water’s edge” method.

Decades later, the system was tweaked again to favor California corporations that had multi-state or multinational operations.

AB 71 would severely limit the “water’s edge” option by requiring corporate and personal taxpayers to include income from foreign operations deemed to have been inequitably sheltered from taxation, partially adopting new federal taxation rules signed by former President Donald Trump in 2017.

Newsom Under Pressure to Address the Measure

The measure could put Gov. Gavin Newsom on the spot. Facing a recall election later this year, he’s told the Legislature not to send him any new major personal or corporate tax hikes, but at the same time has declared homelessness to be a high-priority problem.

Democratic legislators have attempted to shield Newsom from controversy by suspending action on high-profile measures that he had endorsed in principle, such as a ban on fracking and single-payer health care.

AB 71 could also fall into that too-hot-to-handle category.

CalMatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more stories by Dan Walters, go to calmatters.org/commentary.

[activecampaign form=19]

RELATED TOPICS:

DON'T MISS

What Are Fresno Real Estate Experts Predicting for 2025 and Beyond?

DON'T MISS

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

DON'T MISS

Trump Sets 10% to 41% ‘Reciprocal’ Tariffs on Dozens of Countries’ Exports

DON'T MISS

Fresno Fire Displaces Family of Three, Pets Rescued

DON'T MISS

Measure C Advisory Group Still Squabbling but Agrees on Mission Statement

DON'T MISS

Adopt Eevee and She’ll Bring Sunshine Into Your Life

DON'T MISS

Fresno County Authorities Arrest Suspect, Recover Firearms and Drugs in Fowler

DON'T MISS

Countries With No Trade Deal Will Hear From US by Midnight, White House Says

DON'T MISS

Trump’s Envoy Meets Netanyahu for Gaza Aid, Ceasefire Push

DON'T MISS

Fresno’s $100M Warehouse Project Means Big Things for City: Dyer

DON'T MISS

Construction of $200M Trump Ballroom at the White House to Begin in September

DON'T MISS

Tulare County Fire Responds to Three-Alarm Fire at Commercial Building Near Tipton

UP NEXT

Fresno Fire Displaces Family of Three, Pets Rescued

UP NEXT

Measure C Advisory Group Still Squabbling but Agrees on Mission Statement

UP NEXT

Adopt Eevee and She’ll Bring Sunshine Into Your Life

UP NEXT

Fresno County Authorities Arrest Suspect, Recover Firearms and Drugs in Fowler

UP NEXT

Countries With No Trade Deal Will Hear From US by Midnight, White House Says

UP NEXT

Trump’s Envoy Meets Netanyahu for Gaza Aid, Ceasefire Push

UP NEXT

Fresno’s $100M Warehouse Project Means Big Things for City: Dyer

UP NEXT

Construction of $200M Trump Ballroom at the White House to Begin in September

UP NEXT

Tulare County Fire Responds to Three-Alarm Fire at Commercial Building Near Tipton

UP NEXT

If Texas Gerrymanders Its House Districts, Costa Says California Must Follow Suit

Adopt Eevee and She’ll Bring Sunshine Into Your Life

10 hours ago

Fresno County Authorities Arrest Suspect, Recover Firearms and Drugs in Fowler

10 hours ago

Countries With No Trade Deal Will Hear From US by Midnight, White House Says

10 hours ago

Trump’s Envoy Meets Netanyahu for Gaza Aid, Ceasefire Push

11 hours ago

Fresno’s $100M Warehouse Project Means Big Things for City: Dyer

11 hours ago

Construction of $200M Trump Ballroom at the White House to Begin in September

12 hours ago

Tulare County Fire Responds to Three-Alarm Fire at Commercial Building Near Tipton

12 hours ago

If Texas Gerrymanders Its House Districts, Costa Says California Must Follow Suit

13 hours ago

Yosemite’s Largest Campground Reopens Friday After $26.2 Million Renovation

13 hours ago

Two Men Shot During Fight at Tulare Apartment Complex

13 hours ago

Trump Sets 10% to 41% ‘Reciprocal’ Tariffs on Dozens of Countries’ Exports

President Donald Trump signed an executive order on Thursday imposing reciprocal tariffs ranging from 10% to 41% on U.S. imports from dozens...

7 hours ago

President Donald Trump speaks during a cabinet meeting at the White House in Washington, D.C., U.S., July 8, 2025. (Reuters/Kevin Lamarque)
7 hours ago

Trump Sets 10% to 41% ‘Reciprocal’ Tariffs on Dozens of Countries’ Exports

A fire sparked by oily rags displaced a Fresno family and damaged their home Thursday, July 31, 2025, but firefighters rescued three dogs, a chameleon, and a turtle with no injuries reported. (Fresno FD)
9 hours ago

Fresno Fire Displaces Family of Three, Pets Rescued

Measure C MeasureC Highway 41 HWY41 Transportation tax (GV Wire Composite/Paul Marshall)
9 hours ago

Measure C Advisory Group Still Squabbling but Agrees on Mission Statement

Eevee Is GV Wire's Adoptable Cat of the Week, July 31, 2025
10 hours ago

Adopt Eevee and She’ll Bring Sunshine Into Your Life

Fresno County authorities helped Fowler police arrest a suspect on Thursday, July 31, 2025, and seize stolen firearms, drugs, ammunition, and cash following a grand theft investigation. (Fowler PD)
10 hours ago

Fresno County Authorities Arrest Suspect, Recover Firearms and Drugs in Fowler

White House Press Secretary Karoline Leavitt speaks during a press briefing at the White House in Washington, D.C., U.S., July 31, 2025. (Reuters/Evelyn Hockstein)
10 hours ago

Countries With No Trade Deal Will Hear From US by Midnight, White House Says

Palestinians carry aid supplies that entered Gaza through Israel, in Beit Lahia in the northern Gaza Strip, July 30, 2025. (Reuters File)
11 hours ago

Trump’s Envoy Meets Netanyahu for Gaza Aid, Ceasefire Push

11 hours ago

Fresno’s $100M Warehouse Project Means Big Things for City: Dyer

Help continue the work that gets you the news that matters most.

Search

Send this to a friend