California lawmakers negotiate new business, phone taxes
SACRAMENTO, Calif. (AP) — California lawmakers are negotiating a pair of proposed tax increases as the deadline approaches for Democratic Gov. Gavin Newsom to sign a $214.8 billion operating budget.
Lawmakers approved the budget bill last week, but lawmakers still must pass more than a dozen “trailer bills” that detail how the money must be spent.
Monday, the state Senate approved a plan to raise taxes on some business income and give that money to people who earn less than $30,000 a year in their annual tax refunds. The Assembly, meanwhile, approved a fee of up to 80 cents per month on phone bills — including cell phones — to pay for an upgrade to California’s aging 911 system following the most devastating wildfire season in state history.
The businesses taxes are a tough vote in the Assembly , where Democrats in power have concerns about voting to align the state’s tax code with a portion of the 2017 federal tax law signed by Republican President Donald Trump. The 911 fee is a tough vote in the Senate, where lawmakers are wary of voting again on a cell phone fee after a similar proposal fell one vote shy of passing last year.
Lawmakers in both chambers breezed through a series of trailer bills on Monday that did things like temporarily suspend taxes on diapers and tampons and extend the state’s paid family leave program by two weeks. Lawmakers passed each one with little debate and with bipartisan agreement on several points.
But the Legislature is poised for a pair of critical votes on Thursday on the 911 fee and business taxes, with leaders in both chambers trying to pressure the other one to vote.
“It is really kind of part of our strategy to make sure one house takes a vote that may feel difficult by the other house, and vice versa,” said Sen. Holly Mitchell, a Los Angeles Democrat and chairwoman of the Senate Budget Committee. “I think those are appropriate dots to connect.”
The business tax changes are part of a plan to selectively adopt some of the federal tax changes Trump signed into law in 2017. Some items would lower taxes and others would increase them. Overall, the state would get an additional $1.6 billion in revenue during the fiscal year that begins July 1.
Newsom wants to use most of that money to triple the state’s earned income tax credit program, which boosts the size of annual tax refunds for low-income people. The plan would make about 1 million more people eligible for the credit. Plus, it would give $1,000 to people who make less than $30,000 a year and have at least one child under 6.
But the plan would still not include immigrants who pay taxes but do not have Social Security numbers. Newsom would not include that in the budget because he said it was too expensive, but pledged to work toward it in future years.
In an effort to win votes, lawmakers have stopped referring to the bill as “conforming” to the federal tax code, but instead call it “loophole closure.” Assemblyman Adam Gray, a moderate Democrat from Merced, supports the bill. He said he has never seen “so much consternation” about a tax bill, noting lawmakers often conform to federal tax changes without controversy.
The 911 fee is an effort to upgrade the state’s system so it can handle text messages, photos and videos. But the fund that pays for the system is based on a fee for each phone call. The fund has been steadily declining as more people opt to send text messages.
Assemblyman Jay Obernolte, R-Big Bear Lake, argued that the state should use some of its surplus to pay for the changes rather than raise fees on consumers. But Assemblywoman Christy Smith, D-Santa Clarita, argued that the state’s 911 system is essential and requires funding beyond a short-term surplus.
“Yes, we have a surplus. But we don’t always have a surplus in California,” she said. “We will always have emergencies.”
Associated Press writer Andrew Oxford contributed.