Home Investments Entrepreneurs and investors may leave Silicon Valley

Entrepreneurs and investors may leave Silicon Valley

by marusia

An increase in the tax for highly paid professionals in California will lead to an increase in the overall rate to 54%. This could lead to an exodus of entrepreneurs and investors from Silicon Valley.

Democrats in the California State Legislature have proposed raising the tax on the highest paid workers to help those hardest hit by the coronavirus crisis, CNBC reports. In particular, funding will be used to pay for schools and support small businesses. According to officials, the increase in the tax will allow to receive more than $6 billion a year.

The state of New York was the first to make such an initiative to cover the growing budget deficit, but California is proposing to raise the tax above the rest of the states. The marginal tax rate in California is 13.3%. After the changes, it will rise to 16.8% on income over $5 million, and the combined federal and local tax rate will increase to 53.8%.

High-earning Californians will not be able to deduct the amount of the new tax from their federal tax returns. The tax increase will affect only 0.5% of the state’s taxpayers, but they are the ones who work in the technology industry. They account for 40% of state revenue, according to California’s Franchise Tax Board.

The tax will also apply to capital gains, which make up a significant proportion of tech income. As more companies allow employees to work remotely over the next year, people will be able to move out of California. Changes can be approved in August, then they will be applied to income received from January 2020.

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