California Senator Proposes New Tax on Professional Services

Recently, California State Senator Bob Hertzberg proposed a new tax on professional services. Although the bill, known as Senate Bill 8 or the Upward Mobility Act, would replace Proposition 30, which was passed by California voters in 2012 and is set to expire in 2018.  If passed, Senate Bill 8 will take effect in 2019.

While the Upward Mobility Act is currently a work in progress, it is being touted as a means of starting a conversation in the California Capitol about adopting a more progressive tax structure.

Several other states, including Texas and New York, already impose taxes on certain services. California, however, does not have a tax on professional services. Hertzberg hopes to change that, and in the process raise revenue and change the California corporate tax structure. There are scarce details about how a new corporate tax structure will look, but Hertzberg’s office has said the new legislation will not only raise taxes but also create new incentives for business investment.

Senate Bill 8 also proposes a reduction to the personal income tax, with families earning $100,000.00 or less per year paying only 1% in income tax. Individuals who are top earners could also see a drop in their personal income tax.

According to a representative from Hertzberg’s office, a tax on professional services would be directed to public schools and universities, local governments, and a new $2 billion earned income tax credit for low-income workers. It is estimated that a tax on services could bring in a projected $10 billion each year.

  • Senate Bill 8 includes an exception to the professional service tax for the health care and education industries, as well as small businesses with annual sales under $100,000.00.  Those businesses that would be effected include:  Professional services (i.e., accounting, law, architecture, etc.)
  • Financial services (i.e., insurance services, investment counseling, property sales agents, etc.)
  • Construction services (i.e., carpentry, plumbing, painting)
  • Agricultural services (i.e., landscaping)

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with your real estate, business, or contract law needs.

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