Where would the money go? 1 RecipientAmount K-14 Education$3 Billion Local Government$3 Billion Earned Income Tax Credit (1) $2 Billion University of California and California State University $2 Billion Total$10 Billion NOTES:(1) The intent of the Earned Income Tax Credit is to offset any increased sales tax burden to low income earners SOURCE: The Upward Mobility Act

California would not be the only state to tax services 2 NOTE:(1) Sales tax rates on services ranges from 2.9% to 7.0% in other states that tax services SOURCE: Federation of Tax Administrators Number of Services Taxed for Select States (1)

Services taxed under the Upward Mobility Act 3  The Upward Mobility Act would be a broad base tax on services including: -Professional services, such as accounting, architecture and law -Financial services, such as insurance services, investment counseling and property sales agents -Construction services such as carpentry, painting and plumbing -Agricultural services, such as landscaping  The following services would not be taxed under the Upward Mobility Act -Health care services -Education -Very small businesses SOURCE: SB8 – Upward Mobility Act

The Upward Mobility Act vs Other Recent Proposals 4  Creates $10 billion in additional revenue, unlike the California Commission on Tax Policy in the New Economy (the Davis commission) and the Commission on the 21 st Century Economy (the Parsky commission) that were both revenue neutral.  Restructures and modernizes the personal income tax rate while lowering the top marginal rate to prevent top earners from leaving California, unlike the Davis commission that did not address personal income tax.  Looks at making California’s Corporation Tax more inline with other states once minimum wage with cost of living adjustments has reached a reasonable rate, as determined by the legislature.  Establishes up to a $2 billion Earned Income Tax Credit to protect low income workers; EITC was not addressed by either the Davis or Parsky Commission.  Establishes a tried and tested service tax, unlike the untested Business Net Receipts Tax proposed by an earlier commission.