Proposition 30 Could Increase Top California Tax Bracket to 15.05% in 2023

If passed, California’s Proposition 30—on the November 8, 2022, ballot—would increase the top marginal income tax rate from 13.3% to 15.05% for income above $2 million. It would apply to individuals, trusts, and estates.

The proposal states funding would be used for programs to help reduce air pollution and prevent wildfires. This additional tax would end by January 2043, or potentially earlier if California drops its statewide greenhouse gas emissions.

This could affect business owners, executives, and other individuals who are California residents.

The ballot measure proposes a new revenue code section that would become effective January 1, 2023.

Potential Impacts

Proposition 30 would add a 1.75% tax rate on income above $2 million. For example, on the sale of a business for $10 million by an individual, Proposition 30 could add $140,000—1.75% on $8 million—of additional California tax.

The tax imposed by this section couldn’t be offset by credits, including:

  • Taxes paid to another state
  • Pass-through entity tax
  • Other common credits, like R&D

Additionally, there are no proposed exclusions from what would be counted as gross income. For example, some income from the sale of a primary residence is generally excluded from tax, but that exclusion wouldn’t apply for this.

We’re Here to Help

To learn more about how Proposition 30 could impact your finances or to evaluate potential planning strategies, contact your Moss Adams professional.

You can find additional resources on our Tax Planning for Individuals page.

Contact Us with Questions

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