Article
Proposition 30 could increase top California tax bracket to 15.05% in 2023
Sept. 11, 2022 · Authored by Bob Reynolds, Chris Parker
If passed, California’s Proposition 30 — on the Nov. 8, 2022, ballot — would increase the top marginal income tax rate from 13.3% to 15.05% for income above $2 million. It would apply to individuals, trusts, and estates.
The proposal states funding would be used for programs to help reduce air pollution and prevent wildfires. This additional tax would end by January 2043, or potentially earlier if California drops its statewide greenhouse gas emissions.
This could affect business owners, executives, and other individuals who are California residents.
The ballot measure proposes a new revenue code section that would become effective Jan. 1, 2023.
Potential impacts
Proposition 30 would add a 1.75% tax rate on income above $2 million. For example, on the sale of a business for $10 million by an individual, Proposition 30 could add $140,000 — 1.75% on $8 million — of additional California tax.
The tax imposed by this section couldn’t be offset by credits, including:
- Taxes paid to another state
- Pass-through entity tax
- Other common credits, like R&D
Additionally, there are no proposed exclusions from what would be counted as gross income. For example, some income from the sale of a primary residence is generally excluded from tax, but that exclusion wouldn’t apply for this.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.