State Sen. Nancy Skinner, D-Berkeley, along with Assemblymembers Buffy Wicks, D-Oakland, and Rob Bonta, D-Alameda, announced today Senate Bill 37, “Corporate Fair Share for California & Californians,” which will increase the tax rate on large corporations to provide billions of dollars in new revenue for childcare, schools, and higher ed.
SB 37 will provide California with a sustainable revenue source by increasing taxes on large corporations that recently received a massive federal tax cut. SB 37 would allow the state to capture a share of that windfall by raising corporate income taxes on the top 0.2% of companies that do business in California. SB 37 is also designed to reduce California’s income inequality by closing the gap between what corporations pay their CEOs and their average employees.
“Corporate profits are at an all time high, yet the portion of tax revenue California receives from corporations is at close to its lowest point in 40 years,” Skinner said. “SB 37 just asks corporations to pay their share, so we can cut income inequality and help fund our kids, our teachers, and our schools.”
“It’s shameful that California ranks 41st in per pupil spending nationwide when we used to rank in the top 10,” Wicks said. “SB 37 will provide California with billions in new revenues — revenues that will fund higher teacher salaries, more education programs, and early childhood needs.”
Throughout the 1970s, corporate tax revenue made up more than 15% of California’s general fund revenues. Today, corporate tax revenue accounts for about 9%. And with the 2017 Trump tax cut that slashed the corporate tax rate 40% nationwide, corporations that do business in California are holding on to an extra $13 billion to $17 billion, money they previously transmitted to the IRS.
At the same time, income inequality has risen steeply since the 1970s, with the gap between top corporate pay and middle-class wages widening exponentially. In 1978, U.S. CEO’s were paid just 30 times the pay of an average worker. Since then, according to a 2018 report by the Economic Policy Institute, compensation for CEOs has skyrocketed to 312 times the pay of the typical worker. Today, the average CEO of a large corporation pockets about $19 million a year compared to just $54,600 for the typical worker.
And here in California, income inequality has risen faster than most other states, with California having the fourth highest gap between rich and poor.
“Our hugely profitable corporations did not need Trump’s massive tax cut windfall. SB 37 will allow California to capture part of that giveaway and redirect funds to state programs that need it most — like public education and social services,” said Robert Reich, a UC Berkeley professor and former U.S. Labor Secretary, who supports SB 37. “SB 37 also begins to address California’s widening income inequality by telling big companies: stop overpaying wealthy CEOs and underpaying your workers.”
SB 37 would raise the state income tax rate on the most profitable corporations — the top 0.2% of companies that do business in California and generate net revenues of more than $10 million annually — from 8.84% to 10.84%. This change will increase state revenues by an estimated $2 billion.
Additionally, SB 37 is designed to further increase the tax rate on large corporations based on the disparity between the company’s executive pay and its average worker pay. These increases are estimated to generate an additional $2.5 to $3 billion annually.
“Increasing taxes on big corporations and incentivizing those corporations to pay their employees higher wages is a progressive way to capture new funding for our schools and other programs, while reducing the income inequality of regular Californians,” Skinner added.
Sen. Nancy Skinner (@NancySkinnerCA) represents the 9th Senate District and is the Senate Majority Whip.