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Bidding Work in California? Be Sure to Consider Effect of Proposition 30.


In the November elections, the voters of California passed Proposition 30.  While intended to help the education budget for California, this proposition will cause significant increases to personal tax rates in California.  The income tax will apply retroactively to all income earned or received since the first of the year (January 1, 2012) and end in 2018.  The proposition does not affect corporate tax rates.

  • Creates four high-income tax brackets for taxpayers with taxable incomes exceeding $250,000, $300,000, $500,000 and $1,000,000.
  • Imposes a 10.3% tax rate on taxable income over $250,000 but less than $300,000, a 10.6% increase over current policy of 9.3%. The 10.3% income tax rate is currently only paid by taxpayers with over $1,000,000 in taxable income.
  • Imposes an 11.3% tax rate on taxable income over $300,000 but less than $500,000, a 21.5% increase over current policy of 9.3%.
  • Imposes a 12.3% tax rate on taxable income over $500,000 up to $1,000,000, a 32.26% increase over current policy of 9.3%.
  • Imposes a 13.3% tax rate on taxable income over $1,000,000, a 29.13% increase over current “millionaires tax” policy of 10.3%

When looking at bidding work in California, contractors need to consider this increase in their estimates.  If a contractor is a flow through S Corporation or Partnership and files a composite tax return on behalf of its shareholders, it will pay income tax at the highest taxable rate, 13.3%.