California Pension Tax Proposition (2010)

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A California Pension Tax Initiative (09-0006, 10-0014) did not qualify for the November 2, 2010 state ballot as an initiated state statute.[1]

The measure would tax California public employees who draw a pension from the state of more than $40,000/year. If enacted, the California Legislative Analyst's Office indicates the measure would raise $6 billion to $8 billion in new taxes.[1]

Paul McCauley is the potential initiative's official proponent.

A brief summary of the proposed initiative is "Imposes additional, annual taxes on California residents who receive income in excess of $40,000 from pension distributions, social security, and the cash value of health care benefits. May impose a one-time, additional tax on non-California residents whose pension benefits exceed $50,000 in a year, and who earned income in California. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: Annual state revenue increases of up to $6 billion to $8 billion beginning in 2010 from new taxes on pension benefits. Revenues likely would decline over time due to changes in behavior."

433,971 valid signatures of California registered voters are required to qualify the measure for the ballot.

Two versions of the McCauley Pension Reform Act were presented to state election officials. 09-0006 was filed on March 25, 2009. Its petition drive deadline has elapsed. Version 10-0014 was filed on February 18, 2010. This version awaits a ballot title. Once it receives a ballot title, organizers will have 150 days to collect signatures to qualify it for the ballot.

Language problems

The California Legislative Analyst's Office indicated in June 2009 that there might be legal problems with the 09-0006 version filed in March 2009.[2]

The LAO writes:

"The measure raises legal issues that could result in the excise tax being invalidated under federal law. According to FTB, states are prohibited from imposing an income tax on the retirement income (from an in-state employer) of a nonresident. While the proposed excise tax is not technically a tax on current income, the outcome is similar (especially since this measure allows the excise tax to be paid over time). As a result, the excise tax may not survive a legal challenge. In that case, the annual revenue estimate would drop by $1 billion to $3 billion."[3]

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