President Joe Biden is right. The massive tax cuts under the Trump administration turned out to be nothing more than a giant giveaway to the world’s largest corporations.
Mega corporations like FedEx, Nike, General Motors, Ford, Chevron and dozens of others have paid nothing or almost nothing in federal taxes, while raking in billions of dollars.
At the same time, the Trump tax handouts have worsened our national debt and harmed our economy. In all, the cuts cost our nation roughly $2.3 trillion and deepened the federal deficit by $2 trillion.
Biden has proposed to partially reverse the Trump tax cuts, which slashed the federal corporate tax rate in 2017 by 40%, from 35% to 21%. Under Biden’s plan, the corporate rate would increase modestly to 28%.
The president’s plan is smart, prudent and responsible, and would help balance our federal budget. That plan, however, is being stalled by the Republicans who control Congress, so the Trump tax cuts appear here to stay.
But that doesn’t mean the fight for fairness is over. California has the opportunity to follow the president’s lead and recover some of Trump’s tax giveaway. The California Senate’s Protect Our Progress budget plan would do exactly that, while also helping small businesses – the backbone of our economy who’ve been buffeted by inflation – and maintaining funding for our schools, homelessness programs, climate protection, child care and more.
A generation ago, big corporations paid a higher tax rate in California and shouldered a fairer share of our state’s tax burden than they do now. In the early 1980s, corporations that reported profits in our state paid 9.6% of their income in state taxes. But during the Republican-led gubernatorial eras of George Deukmejian and Pete Wilson, the state corporate tax rate was lowered twice to 8.84% – where it still stands today – for all businesses, big and small.
Under the Senate budget plan, California would recoup some of the Trump tax giveaways by increasing the tax rate on the very largest corporations. The new rate of 10.99% would apply to just about 2,500 corporations, located all over the U.S., that report taxable income of more than $1.5 million from the business they do in California. The tax rate would impact the nation’s biggest companies, regardless of where they’re headquartered, from WalMart and Amazon to Coca-Cola and Chevron.
Smaller companies that do business in California – the other 99.8% or roughly 1 million businesses – would get a 25% tax cut. Most of those are small businesses that have seen rising costs and could use some help right now. In addition, our Senate plan would provide $1.9 billion in tax relief for renters and low-income families, who also deserve much needed relief from inflation.
In all, our proposed higher tax rate on mega corporations would generate about $6 billion a year in revenue for California. And it would help us avoid budget cuts that we would otherwise face this year, from housing to transportation, broadband, and climate and green energy investments.
This is why we’ve dubbed our budget plan, “Protect Our Progress.” It protects the transformative progress California has made in the past several years to create a more equitable economy for all.
And it does so by requiring big corporations to pay their fair share and by heeding President Biden’s call to recoup some of the huge corporate handouts of the Trump era.
Guest Commentary written by Nancy Skinner. Democratic state Sen. Nancy Skinner of Oakland is the chair of the Senate Budget Committee.
California faces a $31.5 billion budget deficit in 2023-24. Senate Republicans are urging Democrats to be cautious about spending decisions and to ditch a proposal to increase taxes on major corporations.