California will raise the state income tax from 3% to four percent, starting next year, to address growing poverty in the state, Gov.
Jerry Brown announced on Thursday.
The tax hike is expected to cost California $9.4 billion over the next five years, according to a preliminary analysis from the nonpartisan Legislative Analyst’s Office.
The statewide income tax was first introduced in the late 1960s, when it was 3.5% in San Francisco and 5% in Los Angeles.
The income tax has been raised in recent years, starting with the 2017 income tax increase, which took effect Jan. 1.
But a new income tax is needed to offset any state income lost due to a change in income tax rates.
California currently has a 3.6% tax rate, with the highest rate in the nation.
In addition to the increased income tax on income above $500,000, California will also raise the income tax by 0.7 percentage points in 2018 and 2019.
In 2018, California is expected spend $2.9 billion on higher education, including $300 million on the California Institute of Technology’s Institute for Advanced Study.
In 2019, the state will spend $4.4 million on public schools.