California’s Gavin Newsom is praised for the nation’s first union dues tax credit, but it’s not a done deal
California’s new 2022-23 budget, which was signed by Gov. Gavin Newsom (D) on June 27, has been covered in this space and other outlets for including the first tax credit on the income of the country for the payment of union dues. This unprecedented tax credit, which will not be available to most California workers, the vast majority of whom are nonunion, has been welcomed by union leaders and progressive organizations shortly after Newsom signed the new budget.
While news reports say the new tax credit will come into effect as part of the recently passed state budget, that’s not entirely accurate. Further legislation will be required for this union-specific tax relief to take effect.
According to the June 29 report of the California Assembly Budget Committee, “the appropriation will be established in law in an end-of-session bill later in the session, but the appropriation will not be in effect until ‘it will not have been activated by a future budgetary action’. This budget bill, SB 189, was signed by Governor Newsom on June 30. The wording of SB 189 makes it clear that the enactment of the union dues tax credit is far from a done deal:
“Depending on future legislation, including future budget appropriations, and subject to a determination in the spring of 2024 that money from the General Fund on the multi-year forecast is available to support ongoing increases and actions, actions will be given priority: (1) Implement a tax credit under the Personal Income Tax Act to offset some of the costs of joining a union.
Although Newsom is already receiving plaudits for the union dues tax credit, it will be unclear whether this tax credit will actually take effect for two years. “Given the uncertain future, the budget includes the enactment of a limited number of ongoing proposals, subject to a determination in the spring of 2024 that the General Fund can support these policies on the multi-year forecast,” notes the summary. budget released by Governor Newsom’s Office.
“Since the 2018 U.S. Supreme Court ruling in Janus vs AFSC
The vast majority of union political spending goes to helping Democratic candidates. Critics of the California union dues tax credit note that it would force all California taxpayers, including more than 84% of workers who are not union members, to subsidize union political advocacy and expenses. the country.
” Whereas before janus, the burden of subsidizing union speech and advocacy was on public employees (paid with taxpayer dollars), a tax credit for union dues would place the burden squarely on taxpayers,” Nelsen added. “But no one – not public employees or taxpayers – should be forced by government to fund the policy advocacy of private special interest groups.”
California is among the few states where a major tax hike on employers has been enacted amid the pandemic-induced economic downturn. In the summer of 2020, when there were no vaccines on the horizon and many businesses were in the process of closing or about to close permanently, Governor Newsom and state lawmakers increased the multi-billion dollar employer taxes.
Now that the fiscal situation has improved in many states, most currently running budget surpluses, many governors and legislators have enacted broad income tax rate cuts over the past year and a half. California is not among the states where lawmakers are considering a tax rate cut. The most significant tax relief that Newsom and company have approved include a cannabis tax cut and the aforementioned tax credit for union dues.
Although the credit for paying dues offers union members in California tax relief that is not available to most, they will have to wait two more years to find out if they can take advantage of the new tax credit. for contributions. Given California’s notoriously volatile revenue, there is a real possibility that the Golden State may not be able to offer the tax credit in 2024, a tax credit that is not listed in any other state. to such a small segment of the workforce.
Gavin Newsom and state lawmakers will continue to receive praise from key Democratic constituencies for the union dues tax credit. But when it comes to whether this new tax break will ever be codified, “we’ll see” is probably the best answer.