Legislative Alert – AB 1400 and ACA 11

SCGMA officially take an opposing stance to AB 1400 and ACA 11.

AB 1400 is a terrible bill, although it is toothless without Assembly Constitutional Amendment 11 (ACA 11) which puts in place the taxes to fund the program.  ACA 11 would increase CA taxes nearly $163 billion per year – predominantly on businesses – to fund the single-payer healthcare system laid out in AB 1400.

In addition to the ridiculously negative fiscal impact on contractors and their business these measures would bring, the proposals would also upend our industry health and welfare trusts.

SUMMARY

The proposal, Assembly Constitutional Amendment 11, includes:

  • A Gross Receipts Tax on California Businesses. Annual excise tax at 2.3 percent of gross income above $2 million for all qualified businesses in the state. (The author estimates that this would be a $108.1 billion annual tax hike, but none of the author’s estimates appear to account for changes in taxpayers’ behavior if his proposal is approved.)
  • A Payroll Tax on Employers and Employees. Employers with 50 or more employees would pay a 1.25 percent payroll tax rate on wages and other compensation of their employees (estimated revenue of $17.5 billion per year) and employees earning more than $49,900 in wages or compensation per year would pay a 1 percent payroll tax (estimated revenue of $14 billion per year).
  • A Personal Income Tax Increase on Income Over $149,509. California’s 13.3 percent top personal income tax rate, already the highest in the country, would increase to 15.8 percent. While the author describes the tax as one on “high earners,” it also would impact many taxpayers who meet most definitions of being in the middle class. The tax hikes proposed:
    • 0.5 percent on income of $149,509 to $299,508;
    • 1 percent on income of $299,509 to $599,012;
    • 1.5 percent on income of $599,013 to $1,299,499;
    • 1.75 percent on income of $1,299,500 to $2,484,120; and
    • 2.5 percent on income above $2,484,121.

The author estimates that the PIT increase would cost taxpayers $23.2 billion per year.

ACA 11 was introduced as the funding mechanism in an effort to resurrect AB 1400, which would create a right to comprehensive healthcare coverage for every California resident, with a new bureaucracy intended to reach this goal. The legislation is sponsored by the California Nurses Association, which has harshly and publicly criticized Democratic Assembly Speaker Anthony Rendon in recent years due to Rendon’s decision not to put the force of the speakership behind the legislation. AB 1400 was introduced in early 2021 and has begun to move again.

As a reminder, as a constitutional amendment, ACA 11 needs the approval of at least two-thirds of both houses to be placed on the ballot (the governor would not have an opportunity to sign or veto the measure). If placed on the ballot, it would need a majority vote in November’s statewide election. However, AB 1400 would need the approval of the governor in order to be enacted.

We are actively fighting these legislations as best as we can and will keep you updated as things progress.

This content was provided by SCGMA’s professional counsel and is for general informational purposes only. Readers should contact their own professional counsel for company specific matters in the relevant jurisdiction.

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