Proposed California Tax Hike to Provide $2 Billion Per Year to Support Homeless People

6 mins read

A California legislation that aimed to increase taxes on wealthy multinational corporations was proposed by a coalition to gather more than $2 billion every year, which would be used to support homeless people in the state.

Assembly Bill 71 would reform California’s approach when it comes to addressing homelessness in the state, the legislation’s supporters claim. It offers a continuous and adequate source of funds to keep the homeless out of the street. However, in the views of the opposition, the law would make an impression that businesses are frowned upon in California.

Surging Homelessness

The Democratic Assemblywoman of Los Angeles, Luz Rivas, pointed out that one in four Americans in California is homeless. “Our state is facing an unprecedented homelessness crisis that’s on the verge of becoming a full-blown catastrophe due to the economic impacts of COVID-19,” she said.

The current pandemic emphasized the challenge of staying at home in California for homeless people as they find it hard to find a roof over their heads. Authorities decided to relocate numerous homeless individuals into hotel rooms or socially distanced tents, or reduced-capacity shelters.

However, there were still many who had no choice but to spend their nights outside. The housing cost in California is one of the most expensive in the country, and salaries are not enough to keep up, making the gap between rich and poor larger.

Despite Democrats, who are known to be more likely to approve taxes on corporations, control both chambers of the Legislature, nobody is certain if the bill would be approved.

On the other hand, California State Governor Gavin Newsom opposed the higher taxes on the rich in his budget proposal last week, claiming that such taxes are “not part of the conversation.” This is despite Newsom’s pledge on homelessness in his State of the State address last year and securing thousands of hotel rooms for around 150,000 homeless people for what he hoped would lead to additional housing during the pandemic.

It was not the first time that homeless and housing representatives have turned towards those with enormous cash resources. Previously, there was a controversial tax on uber-wealthy companies in 2018, which was approved by San Francisco voters to fund homeless programs. However, the measure has split the city’s tech giants.

Unfriendly to Businesses

Supporters of the legislation, including the policy director for Housing California, Christopher Martin, said that the state would profit an estimated $2.4 billion every year with Assembly Bill 71. It does this by increasing the corporate income tax from 8.84% to 9.6% for California companies that make over $5 million per year in profits.

In the May report from the California Budget and Policy Center, corporations pay a significantly smaller percentage of income tax compared to three decades ago. According to Martin, the bill would carry the tax rate up and make it comparable to what it was in 1980.

In recent months, many tech giants and leaders, including Tesla CEO Elon Musk and Hewlett Packard Enterprise, have left California, giving support to claims that the state was unfriendly towards businesses. Martin said the new tax increase would not impact the corporations’ location or where the CEO resides, as it would tax on income made in California.

Despite concerns, lawmakers should prioritize helping residents recover before entertaining a multi-billion-dollar tax increase, which will add up to the reputation of the state of being hostile to businesses, the California Taxpayers Association argued.

“We do think that just by proposing a major tax like this, the proponents are having a negative impact on the state’s ability to compete with other states,” spokesman David Kline said. He noted that any effort that stifled California’s economic recovery would be counterproductive to the state’s condition, ABC27 reported.

In a press conference, the mayors of Los Angeles and Oakland said that every year, more than $2 billion worth of dedicated funding would be used to support the construction of more shelters, permanent housing, caseworker services. Officials argued that Sacramento authorities were uncooperative in trying to solve the problem that many have considered to have been here for a long time.

“This is a human-caused problem that can be solved by human beings; I’m confident of that. These things can get us to a day where we look backward and say, ‘People don’t live on the streets anymore. How did we ever live that way?'” said Los Angeles Mayor Eric Garcetti.

Danielle Joyce Ong

Danielle is a local journalist with a passion for exploring stories related to crime and politics. When Danielle isn't busy writing or reading, she is usually exploring the great outdoors and all the hiking trails in the Bay.