New, higher tax rates on large corporations doing business in California would raise $2.4 billion to fund state homeless programs under a bill announced Wednesday.
Assembly Bill 71, known as the “Bring California Home Act,” would raise tax rates on businesses with annual profits of more than $5 million. The state would use that money to prevent families from falling into homelessness, expand emergency shelters, create more affordable housing and fund services including employment support for unhoused people.
As California’s homelessness crisis continues to grow, and experts worry the COVID-decimated economy will force many more people onto the streets, proponents of the new bill say AB 71 gives the state a fighting chance at changing that narrative. At least 151,000 Californians have no place to call home.
“AB 71 is the first proposal that is comprehensive enough and at scale to actually permanently end homelessness,” Oakland Mayor Libby Schaaf, whose city is struggling with an explosion of tent and vehicle encampments, said during a media briefing Wednesday.
But critics say now — during the midst of an economically devastating pandemic — is not the time to raise taxes on businesses.
“If we’re looking long-term at California’s economic and fiscal viability, this couldn’t be a worse tactic,” said Jim Wunderman, president and CEO of the pro-business Bay Area Council. California’s tax rates for business are already high, he said, and many business leaders he talks to are considering leaving the state, he said.
Several major Silicon Valley companies already have announced they’re relocating, including Oracle and Hewlett Packard Enterprise.
But advocates say the tax hikes are necessary. For years, California has been attempting to solve the housing crisis piecemeal, without a long-term strategy. When Gov. Gavin Newsom proposed his 2021 budget last week, offering $1.75 billion in new investments for homeless housing and services, experts in the field applauded the one-time grants, but criticized the budget’s failure to establish a permanent funding source.
Last year, a group of legislators tried and failed to pass AB 3300, which would have funneled an annual $2 billion in general funds toward solving the state’s homelessness crisis.
“We know that there is a coalition that wants to do this, but each year if we have to fight a budget battle with insufficient dollars and insecure dollars, not knowing where they come from, it makes this work close to impossible,” Los Angeles Mayor Eric Garcetti said during the briefing.
AB 71, co-sponsored by Assemblymembers David Chiu (D-San Francisco), Luz Rivas (D-Arleta) and Richard Bloom (D-Santa Monica), would change that. The bill would increase corporate tax rates for large businesses from 8.84% to 9.6% — bringing them back to where they were in 1980. For financial institutions, tax rates would increase from 10.84% to 11.6%. It also would increase taxes on profits companies earn overseas, which were reduced by President Donald Trump’s 2017 tax cuts.
The changes would impact all large corporations that do business in California — not just those headquartered here.
Housing California estimates the tax increases would affect about 2,285 companies.
“We don’t want to do something that would chase business out of California,” Garcetti said, pointing out that having encampments on their doorstep is worse for businesses than increased taxes. “This is thoughtfully done so we can see businesses thrive.”
Large companies based in San Francisco already pay an extra tax toward the city’s homelessness programs.
Statewide, the money from AB 71 would help an estimated 28,000 people on the brink of homelessness stay housed, 25,000 unhoused people and families access safe emergency shelter and 43,000 people move into permanent housing, according to the lawmakers. It could help another 50,000 homeless people reach job training and other services.
“This measure, AB 71, is not just about money. It’s about strategy,” Chiu said during Wednesday’s briefing. “It’s about a roadmap and how we address homelessness in a meaningful way, which frankly is a new approach for our state to take.”
That strategy includes accountability, Chiu said. To access the funding, the state must first analyze its homelessness spending and identify gaps and holes. Every city and county that receives money under the bill must report on exactly how the funds are used, how many people they serve, and how they are reducing homelessness. The state will conduct regular audits and local governments will be evaluated on their progress.
In Oakland, Schaaf would use her city’s allocation under AB 71 to focus on preventing homelessness and building permanent, affordable housing. The bill also requires 10% of its funds go toward helping homeless youth, which Schaaf said would allow Oakland to improve its shelter options for young people.
AB 71 is in the Housing and Community Development Committee, where Chiu, the committee chair, expects it will come up for a vote in March.
“If this legislature does not have the courage to adopt what we have all agreed is a long-term, sustainable end to homelessness,” Schaaf said, “not this one-time just if there’s a surplus in the budget haphazard set of investments, I believe that the concepts behind AB 71 may be worth taking directly to California’s voters.”
But the Bay Area Council will be fighting it every step of the way.
“We’re going to do everything we can to defeat this legislation,” Wunderman said, “and to try to bring some sense to the conversation in Sacramento.”
