California Assembly Preps Business Tax Increase to Fund Homeless Programs

Homeless men and women sit out on a sidewalk in Los Angeles, on Jan. 8, 2020. (Frederic J. Brown/AFP via Getty Images)

California lawmakers are seeking to address the state’s growing homelessness problem with a proposed tax hike on businesses making more than $5 million annually in the state.

Proponents say Assembly Bill 71 (AB 71), also known as the Bring California Home Act, would restore corporate tax rates to 1980s levels to provide an estimated $2.4 billion annually to fund state homeless programs—but opponents argue the tax hike would cost the state business while not addressing the problem properly.

“History has shown us that throwing more money at the problem doesn’t work,” Scott Kaufman, the legislative director of Howard Jarvis Taxpayers Association, told The Epoch Times.

“We shouldn’t downplay the homelessness crisis; it clearly is a problem in California, and you can see it on your streets and city centers. But this is just California throwing money at the problem without actually seeing it through and thinking about it, and it’s just more of the same from Sacramento and from the state.”

The bill was introduced by Assemblymember Luz Rivas (D-Arleta) on Jan. 13. It has support from big city mayors, state housing programs, and nonprofit organizations that say the money will be used to build more affordable housing, create emergency services, and provide employment support for the homeless.

“I appreciate the Governor’s proposed budget on homelessness, but it is clear that one-time funding to combat the homeless crisis that is further compounded every year is not working,” Rivas said in a press release.

“One time allocations do not allow for our local governments to build and plan programs for multiple years; nor does it allow for coordination between our state departments and agencies with homeless programs to create a coordinated and comprehensive approach for tackling homelessness,” she said.

The bill would increase the corporate tax rates for businesses with taxable income greater than $5 million per year from 8.84 percent to 9.6 percent, or 10.84 percent to 11.6 percent for financial institutions, unless the minimum franchise tax is greater.

Oakland Mayor Libby Schaaf told reporters that the bill “is the first proposal that is comprehensive enough and at scale to actually permanently end homelessness.”

But Kaufman said he’s worried the bill will drive more businesses out of the state at a time when they’re vulnerable from financial losses due to COVID-19.

The state, known for its booming economy and tech innovation from Silicon Valley, lost several of its large tech empires in recent years. Last year, Tesla CEO Elon Musk moved his company to Texas citing a better business environment and lower taxes.

“Further clouding California’s already stormy business climate by imposing more taxes on thousands of businesses big and small is the last thing we should be doing in the middle of an economic crisis,” said Jim Wunderman, president and CEO of the Bay Area Council, in a press statement.

The tax proposed by AB 71 would be applied to any business generating profits in the state, regardless of where they are located.

“Businesses leaving out of state cannot escape this tax,” Kaufman said. “So what you'll see is places raising prices, because all businesses pass on costs to us.”

He added, “The real issue is that California has an affordability problem … and this bill is only going to exacerbate it.”

The Homeless Problem

According to Rivas, one in four Americans experiencing homelessness resides in California.

Over the past few years, Gov. Gavin Newsom and the State Legislature have allocated billions of dollars to state homeless programs and local governments to tackle the issue. Even so, the state saw a 16 percent increase in homelessness from 2018 to 2019.

In Venice Beach, homeless encampments have increased during the COVID-19 pandemic, even though there was a concerted effort to direct individuals into the city’s supportive housing.

Soledad Ursua, a neighborhood councilmember who lives a block away from the Venice boardwalk in Los Angeles, told The Epoch Times that the city’s efforts have “just been a real failure.”

“You can’t even walk past the sidewalk now—there’s tents on both sides,” she said, noting that tents are located outside of the supportive housing units.

Ursua said her neighborhood has had less security, fewer police patrols, and zero cleanings because of COVID-19, calling the situation “our worst nightmare really coming true.”

Kaufman and other critics don’t think housing alone will solve the crisis unless it’s paired with full wraparound services to address mental illness and health problems.

In 2016, Los Angeles voters passed Proposition HHH, a bond measure which authorized city officials to allocate up to $1.2 billion to subsidize development of 10,000 housing units for homeless people. Five years later, only 110 housing units have been built.

“They make California a difficult place to build houses, they make California unaffordable, and they tell us that the way to get California more affordable is to tax us to fund those things,” Kaufman said.

AB 71 has been referred to the Assembly Committees on Revenue and Taxes, along with the Committee on Housing and Community Development. Lawmakers are expected to take up discussion of the bill in March.