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California’s budget is the foundation for building a more just and equitable state. And despite a projected budget shortfall, policymakers have the tools to protect Californians and continue to make progress for our communities.

As the state faces declining revenues for the 2023-24 budget year, we know that Californians with low incomes, particularly Black, Latinx, and other Californians of color, are facing the brunt of increased food, energy, and housing costs. At the same time, corporations are posting record profits while paying historically low taxes.

Today, corporations pay only about half as much of their California profits in state taxes as they did in the 1980s, thanks largely to cuts in the corporate tax rate and the expansion of corporate tax breaks. This amounted to a loss of $14.5 billion in 2020 alone — that’s not fair to Californians who keep those corporations running but still struggle to afford basic needs. Every dollar the state spends on a corporate tax break is a dollar that could have been spent to help families afford health care, child care, and housing and ensure they have a strong safety net to turn to in times of need.

What is a tax break?

Tax breaks are exceptions to “normal tax law” that reduce the revenue governments would otherwise collect. These exceptions include but are not limited to, exemptions, deductions, exclusions, tax credits, deferrals, elections, and preferential tax rates. They go by many names including tax breaks, tax expenditures, tax loopholes, or tax preferences.

Without a fairer tax system, we enter 2023 with extreme inequality and a long list of unmet needs in our communities. And the economic challenges facing many Californians will likely worsen in the coming months. Without the expanded federal Child Tax Credit or CalFresh emergency food assistance, the recent dramatic drop in California’s child poverty rate will largely be reversed.

People shouldn’t be pushed into poverty in a state as wealthy as California. And they don’t have to be. Policymakers have the tools to build communities where all Californians share in our state’s prosperity.

Policymakers should prioritize the health and well-being of Californians over ineffective tax breaks that benefit corporations and the wealthy. State leaders can start by:

  • Scaling back costly corporate tax breaks, particularly those with little evidence of working as intended.
  • Making it more difficult for corporations to avoid state taxes by using foreign havens. 
  • Eliminating industry-specific corporate tax breaks like the film tax credit, which has not been found to have significant impacts on jobs or economic growth in the state.

Remember, every dollar spent on corporate tax breaks is a dollar that could have gone to better support the well-being of our communities today and for generations to come. 

As state leaders face an uncertain revenue landscape and dwindling support from a divided Congress, they must ask themselves if spending billions of dollars on tax breaks for corporations — many of which are experiencing windfall profits — is worth the continued investment.

At the Budget Center, we believe that our state’s resources can be better spent on prioritizing the needs of Californians who are struggling to meet basic needs and who have been inequitably excluded from opportunities due to racist, sexist, and classist policies. Because in a state as wealthy as ours, no one should have to live in poverty, and this requires corporations to pay their fair share.

Media Contacts

Kyra Moeller
Communications Strategist

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