Union Station: California’s Workers Tax Fairness Credit would be the first tax credit for union dues in the U.S.

California’s Workers Tax Fairness Credit would be the first tax credit for union dues in the U.S.

A California bill related to the state’s 2022-2023 budget includes a proposed tax credit for union dues. Once implemented, the tax credit would be the first of its kind in the U.S. Union dues are currently tax-deductible in California and some other states. (A tax deduction lowers a person’s taxable income before calculating taxes, while a tax credit reduces the amount of tax a person is responsible for paying.)  

About the tax credit

Gov. Gavin Newsom (D) signed SB 154, the Budget Act of 2022, on June 27. On June 30, Newsom signed SB 189, one of several bills “providing for appropriations related to” the budget act. SB 189 says, “Contingent upon future legislation, including future budget appropriations, and subject to a determination in the spring of 2024 that General Fund money over the multiyear forecasts is available to support ongoing augmentations and actions, the following actions will be prioritized: (1) Implement a tax credit under the Personal Income Tax Law to offset a portion of costs associated with union membership.” 

The Assembly Budget Committee’s floor report from June 29 says, “[The budget develops] the Workers Tax Fairness Credit to turn union dues from being tax deduction [sic] into a tax credit. … The credit will be established in statute in a trailer bill later in the session but the credit will not be in effect until activated through future budget action.” A floor report from June 13 said that the credit would be capped at 33% of dues paid. 

The enacted budget summary says, “Given the uncertain future, the Budget includes the enactment of a limited number of ongoing proposals, subject to a determination in the spring of 2024 that the General Fund can support these policies over the multi-year forecast.”

Background on the budget

The Los Angeles Times’ Taryn Luna wrote, “The California Legislature on [June 13] sent Gov. Gavin Newsom a preliminary state budget plan totaling more than $300 billion[.] … While negotiations between the governor and Democratic legislative leaders continue[d], the spending plan approved by the state Senate and Assembly [was] sufficient to meet a constitutional deadline of June 15 for lawmakers to avoid forfeiture of their paychecks.” 

Newsom, Senate President pro Tempore Toni Atkins (D), and Assembly Speaker Anthony Rendon (D) reached an agreement on the budget framework on June 26. 

Perspectives

Support

Urban-Brookings Tax Policy Center fellow Kim Rueben said, “In general the move from a deduction to a credit will generally make the tax policy more progressive as the value of the tax expenditure will no longer be dependent on the tax rate faced. … In a state like California this in general will be especially true given the progressive nature of its state income tax and who owes income tax. This is especially the case in making it a refundable credit and not requiring the tax-payer to itemize. So the change would make the benefit available to a broader set of Californians and more equitable across different union workers within the state.”

United Domestic Workers of America executive director Doug Moore said, “Tax deductions have generally favored higher income professionals like doctors and lawyers, whose association fees are recognized as a cost of doing business and therefore easily written-off on their taxes. It unfairly privileges high earners over working-class Californians. … UDW fought for the Workers Tax Fairness Credit to level the playing field, because union members deserve these benefits, too.” 

Opposition 

The Los Angeles Daily News editorial board wrote, “A provision slipped into the state budget would force taxpayers to subsidize union dues, handing California’s politically powerful unions an unprecedented handout to shore up their finances. … If taxpayers are covering one-third of union members’ dues, unions can raise their dues at least that much before members feel the effect. This is especially helpful to public employee unions, which have found it more challenging to raise dues ever since the U.S. Supreme Court’s Janus v. AFSCME decision in 2018 allowed members to quit paying dues altogether. … California’s taxpayer subsidy of up to one-third of union dues, therefore, could help unions in other states fund their organizing efforts. That might be an appropriate goal for union federations, but it is not an appropriate use of California taxpayer dollars.” 

Patrick Gleason, vice president of state affairs at Americans for Tax Reform, said, “The first half of 2022 was a mixed bag for California taxpayers who don’t want the state to inflict more costs upon households and the economy. … Many Californians, however, are unlikely to appreciate the fact that Governor Newsom and state legislators created a new tax credit that is unavailable to 84% of Golden State workers. For all the talk about equity & equality coming from the state’s most powerful politicians, California’s new budget takes the state tax code’s already unequal treatment of workers and worsens it.” 

What we’re reading

• The Valley Breeze, “‘Game-changer’ R.I. Supreme Court ruling on municipal department operations,” July 7, 2022
• Richmond Times-Dispatch, “8 things to know about the collective bargaining debate for Richmond city workers,” July 3, 2022 
• Government Executive, “Ketanji Brown Jackson, A Defender of Federal Union Rights, is Now A Supreme Court Justice,” June 30, 2022
• Capitol Weekly, “Attempt to allow Legislature’s staff to unionize moves forward,” June 30, 2022
• GBH News, “With allegations of hypocrisy, State House staffer union ups pressure on Senate President Spilka,” June 29, 2022 
• The Boston Globe, “Mass. Senate staffers push unionization effort; top labor leader backs effort,” June 29, 2022 

The big picture

Number of relevant bills by state

We are currently tracking 148 pieces of legislation dealing with public-sector employee union policy. On the map below, a darker shade of green indicates a greater number of relevant bills. Click here for a complete list of all the bills we’re tracking. 

Number of relevant bills by current legislative status

Number of relevant bills by partisan status of sponsor(s) 

Recent legislative actions

Below is a complete list of relevant legislative actions taken since our last issue.

• California AB189: This appropriations bill includes an ongoing proposal for the creation of a tax credit for union dues.
  • Assembly Budget Committee introduced.
  • Read second time, amended, and sent back to Senate Budget and Fiscal Review Committee on June 26. Committee recommends “do pass” on June 27. Read second time on June 28, ordered to third reading.
• California AB1577: This bill would allow state legislative employees to organize and bargain collectively. 
  • Bipartisan sponsorship. 
  • Senate Judiciary Committee hearing held June 28. Committee recommends “do pass.” Sent back to Appropriations Committee June 29. Senate Appropriations Committee hearing scheduled for Aug. 1. 
• California AB1714: This bill would allow unions representing excluded state employees to request arbitration with the Department of Human Resources in certain circumstances.
  • Democratic sponsorship. 
  • Senate Appropriations Committee hearing scheduled for Aug. 1. 
• California AB2556: This bill would change the time frame for a local public agency employer to implement a final offer after a factfinders’ recommendation has been submitted in the case of a dispute between the employer and employee organization.
  • Democratic sponsorship. 
  • Senate Labor, Public Employment, and Retirement Committee hearing June 29. Committee recommends “do pass.” Sent back to Senate Appropriations Committee.
• California SB189: This appropriations bill includes an ongoing proposal for the creation of a tax credit for union dues.
  • Senate Budget and Fiscal Review Committee introduced. 
  • Assembly passed and Senate concurred June 29. Governor approved June 30.   
• California SB931: This bill would allow a union to bring a claim before the Public Employment Relations Board against a public employer allegedly in violation of California Government Code Section 3550 and sets civil penalties for violations. Section 3550 prohibits public employers from discouraging union membership.
  • Democratic sponsorship.
  • Assembly Appropriations Committee hearing scheduled for Aug. 3. 
• California SB1313: This bill would prohibit Los Angeles County from discriminating against union members by limiting employee health benefits. 
  • Democratic sponsorship.
  • Assembly Appropriations Committee hearing scheduled for Aug. 3. 
• California SB1406: This bill would allow unions representing excluded state employees to request arbitration with the Department of Human Resources in certain circumstances.
  • Democratic sponsorship.
  • Assembly Judiciary Committee hearing June 28. Committee recommends “do pass.” Sent back to Assembly Appropriations Committee with recommendation to place on the consent calendar. Assembly Appropriations Committee hearing scheduled for Aug. 3.
• Michigan SB1093: This bill would remove a current prohibition on public employers using school resources to assist a union in collecting dues. It would also remove a requirement for unions to have an independent examiner verify the union’s calculation of expenditures related to collective bargaining and for those calculations to be made public.
  • Democratic sponsorship.
  • Introduced and referred to Senate Education And Career Readiness Committee June 23. 

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