Accountancy Slice

North America

California Gov. Gavin Newsom is facing a $45bn deficit in the state's budget. Despite his vow to not increase taxes, the revised budget forecasts a larger shortfall than previously estimated. The state's steeply progressive tax system and high tax rates for high wage earners and corporations have led many top earners to move to lower-tax states. Newsom's budget attempts to cover the deficit with accounting gimmicks and tax increases, such as suspending deductions for businesses and capping business tax credits. He also plans to shift spending on mass transit and green energy to a greenhouse gas reduction fund, funded by permits businesses must buy. Additionally, a novel income-based fixed charge for utility bills has been approved, which is essentially a progressive income tax in disguise. Newsom opposes a ballot initiative that would make it harder for regulatory agencies to raise taxes. Despite his claims of frugality, Newsom's budget reveals his priorities and reliance on tax increases and gimmicks.