Sep 17th 2009
California's Commission on the 21st Century Economy is reaching the end of its discussion on proposals for revising California's taxing structure. The Commission met on September 10th and released several new documents discussing its current thoughts on potential proposals, including changes to the personal income tax, a business net receipts tax, changes to the corporation tax, sales and use tax, and requirements regarding the rainy day reserve fund. For more information, see the Commission's website. According to the Commission's website, the following is a description of the major components of the proposed tax plan, with the initial year of implementation in 2012. Personal Income Tax The personal income tax (PIT) would significantly change in structure and the state’s reliance on this revenue source would diminish substantially. Under the proposal, the number of tax brackets would be reduced from six to two; credits would be eliminated (except for the other states’ tax credit); deductions would be dramatically curtailed. After a phase-in period based on reductions in the current law PIT, the new PIT structure beginning in year three of the plan would be as follows:
- Tax rate of 2.75% for income up to $56,000 for joint filers ($28,000 single filers) and 6.50% for incomes above that amount.
- Standard deduction of $45,000 for joint filers ($22,500 single filers).
- Itemized deductions limited to mortgage interest, property taxes and charitable contributions.