Last year, California Governor Gavin Newsom announced a $54 billion budget deficit and demanding President Trump sign the HEROES Act to fund the state or he will cut funding to Schools and Healthcare. One year later, after historically high unemployment due to the COVID-19 pandemic, California now sees a $75.7 Billion dollar surplus. This recent surplus has triggered a forty year old law known as the “Gann Limit”. According to an article by the Associated Press, the Gann Limit was voted into law in 1979 to control the spending of the California legislatures. Basically, it puts a cap on the surplus California can carry and once that threshold is met, the State Government must refund money to the tax payers. This limit threshold has only been crossed once in 1987 when California refunded $1.1 billion. This year, California blew passed this cap by $16 billion. As a result, Governor Newsom has announced an $8 billion “stimulus payment” of $600 plus an additional $500 for families with children for California residents making less than $75,000 a year according to The Guardian. This Golden State Stimulus is technically a tax rebate as a result of the Gann Limit voted in 1979 under Proposition 4.
Despite of having such a large surplus in revenue, California is also moving forward with two legislations to further increase taxes according to Forbes: AB 1253 and AB 2088. AB1253 is an income tax increase for those earning $1 million or more. It will create three new income brackets increasing state income taxes as much as 3.5%. This bill will also impact small businesses earning $1 million or more and will be retroactive for 2020 income tax filings.
AB2088 will impose the first ever wealth tax that on those with worldwide assets of $15 million or more. These assets include cash, collectibles, real property, and pension funds; just to name a few. This law has a controversial clause which allows for a 10 year lookback on any person who lived in California during that ten year period and moved out of state. In other words, anyone who left California would still be liable to this state wealth tax tax up to 10 years after leaving California. According to Forbes, should the law pass, this clause would most likely be struck down in courts according to some legal experts.