Will the coronavirus pandemic lead to tax increases?

By Jon Coupal | In January, Gov. Gavin Newsom presented a proposed budget for fiscal year 2020-2021 which envisioned a several billion dollar increase in spending for existing programs as well as a host of new programs. But that was before COVID-19 arrived at our shores.

In over the course of just three weeks in March, it became obvious that the original budget plan would have to be scrapped because of the most rapid economic downturn America has ever seen.

So it was with great interest that all those who follow California politics were watching last Thursday as Newsom released the “May RevisionRevise” of the budget. To no one’s surprise, the huge dive in state revenues forced the governor to slash $19 billion from January’s initial plan.

According to the governor’s Department of Finance, the budget deficit is $54 billion. But this figure may be overstated in order to present to the public the worst possible case. The non-partisan Legislative Analyst projected the deficit to be as low as $18 billion with a worst case scenario of $31 billion.

The question is whether the budget shortfall will lead to a demand for tax increases. Taxpayers can also take some comfort that there are no immediate plans for broad-based tax increases. The governor proposed two tax hikes, a suspension of a business deduction for what are known as “net operating losses” and a tax on vaping products.

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