On January 5, members of the California Assembly introduced Assembly Constitutional Amendment (ACA) 11. The bill would impose both a new excise tax and a new payroll tax, and increase personal income tax rates to fund universal single-payer health care coverage and a health care cost control system for state residents. These new taxes are estimated to raise nearly $163 billion in revenue per year, and would constitute one of the biggest tax increases in the state’s history.
The bill’s excise tax would impose a 2.3% rate on gross income above $2 million of all qualified businesses in California. The payroll tax would be imposed on employers with 50 or more employees at 1.25% of employee wages and on employees earning more than $49,900 annually at 1% of wages. Finally, the bill would increase personal income tax on income exceeding $149,509, at specified rates, up to a new 15.8% rate for income above $2,484,121 (under current law the top rate is 13.3%).
ACA 11, however, faces numerous hurdles before being enacted. As a constitutional amendment, it must receive a two-thirds majority vote in both houses of the Legislature to be placed on the California ballot. If ACA 11 makes it to the ballot, then it must then be approved by a majority of California voters. And while the Governor would not have veto authority over the amendment, the companion legislation establishing a single-payer healthcare system would require his approval to be enacted. Considering that California is already in a significant budget surplus and that many state legislators are up for reelection in November, ACA 11’s proposed massive tax increase has a very steep hill to climb in 2022.