1 million Californians will owe $12 billion more next tax year
SACRAMENTO — President Donald Trump’s tax cuts will be anything but for about 1 million California taxpayers who will owe Uncle Sam more money a year from now.
They’re the Californians who will lose a collective $12 billion because the new law caps a deduction they have been able to take for paying their state and local taxes, according to a new analysis by the Franchise Tax Board.
Very wealthy Californians earning more than $1 million a year will pay the lion’s share of that money, with 43,000 of them paying a combined $9 billion.
But some middle-class Californians will pay more, too.
About 751,000 households with incomes under $250,000 probably will owe more tax. All together, they’ll owe an extra $1.1 billion.
The FTB has been releasing reports on the new tax law in waves since December, explaining in detail how it differs from state regulations and analyzing how taxpayers might respond to the changes.
Overall, most Californians should see a tax cut. The new federal law doubles the standard deduction available to all taxpayers, and it increases a child tax credit. It also slashes corporate tax rates.
It’s still hard to tell how it will affect individual families and businesses, said Controller Betty Yee, a member of the tax board. She doesn’t have a clear picture yet on how different aspects of the new law will interact and potentially change taxpayer decisions.
“What we’ve been telling taxpayers is just stay in touch with your own situation, stay in touch with your tax preparer,” she said.
“And with the state,” she said, referring to the Legislature and other policy makers, “we shouldn’t rush to judgment.”
The batch of reports the FTB published in March focused on the new cap on deductions for state and local taxes. California Democratic leaders have been wary of how the tax law will play out. Gov. Jerry Brown called it “evil in the extreme,” arguing that it primarily benefits wealthy people and swells federal deficits by hundreds of billions of dollars.
He also said in January that he’s worried that the changes will provide an incentive for wealthy Californians to leave the state, potentially starving the state of tax revenue. The state’s wealthiest 1 percent, for instance, pay about 48 percent of the state’s personal income tax.
Republican George Runner, a member of the Board of Equalization and the Franchise Tax Board, said the board’s report demonstrated that most Californians would benefit from the new law.
“The scenario that was being presented where Democrats were crying that Californians won’t benefit from it truly was out of place,” he said.
“The higher-income bracket” Californians who probably will pay more tax “for the most part, it’s the price you pay for having a highpriced house in California,” he said.