Kill California income tax? Republican governor candidate's big promise

San Francisco Chronicle​

11-05-2025

Republican Steve Hilton is running to be California governor on a promise that — much like Donald Trump's Republican-crafted tax proposal taking center stage in Washington this week — sounds too good to be true: Hilton wants to eliminate the state income tax.
Whooo! No state taxes. Quick show of hands: Who would like to see the state income tax go away? Everybody? What a great idea … if only it wasn't next to impossible to accomplish politically, wouldn't suck money out of public schools and public safety, and wouldn't provide a disproportionate amount of the ensuing tax break to the wealthiest Californians.
'That is going to go,' Hilton of the state income tax in what was essentially a tossed-off line at his campaign launch last month. 'We are going to remove state income taxes for everyone earning $100,000.'
Californians earning more than that will pay a flat tax, which has its own problems.
A few quick facts to show how tumultuous cutting the state income tax would be. Start with how the state income tax provides $100 billion in revenue each year and makes up more than 40% of state revenue and more than half of state general fund revenue.
Hilton told me that he's tackling the tax issues because, rightfully, he is focused on policies that would make our very unaffordable state affordable. Plus, he plans to cut the state budget so much — back to pre-pandemic levels — that the state won't need all that revenue.
Cutting the income tax 'is the quickest and simplest way of bringing some relief to people.'
So in other words, Hilton's seems-too-simple-to-be-true proposal is a funhouse mirror of the 'big beautiful bill' that President Trump and congressional Republicans are Frankensteining in Washington, only more politically impossible to accomplish in deep blue California.
Now, even Trump is having 11th-hour second thoughts about his plan. On Friday, he floated the idea in a social media post of a ''TINY' tax increase for the RICH, which I and all others would graciously accept in order to help the lower and middle income workers.'
Trump wants to levy a new tax of 39.6% on people who make $2.5 million per year, the New York Times reported. It's doubtful that it will ever happen as Trump shot down his own idea in that same doublespeak social media post, writing, 'Republicans should probably not do it, but I'm OK if they do!!!'
Trump's doublespeak on taxes (in the same paragraph!) shows the difficulty in making sexy-sounding yet poorly thought-out promises when it comes to taxes. Going back to his reelection campaign, Trump has a history of throwing out tax catnip as he calls for 'permanent extension of the 2017 tax cuts, additional policies — including no taxes on tips, overtime pay, and Social Security benefits for retirees — as well as creation of a deduction for auto loan interest for American made cars,' according to the nonpartisan Tax Foundation. We'll soon see what promises actually make it into the plan.
A February analysis of Trump's tax plan by the Economic Policy Institute said: 'If these tax cuts for the rich are financed by large spending cuts, this would greatly damage current incomes and future opportunities for the most vulnerable families in the U.S.'
After looking at Hilton's tax proposal, Chris Hoene, executive director of the California Budget and Policy Center, told me: 'Big promises are easy to make, but the tax system and government programs are intricate and carefully crafted. Rash decisions lead to complications, mistakes, and real harm. Without clear details, it's hard to judge whether the proposal is even realistic or just an empty promise.'
As for realism, let's start with the political challenges Hilton would face. Say Hilton pulls off the upset of the century in 2026 and is elected California's governor. Unless California tumbles into the sea, the Legislature will probably still be controlled by Democrats, whom Hilton will rely on to pass his income tax slashing proposal.
Hilton's plan: He conceded to me that if he is elected, it would be 'anyone's measure of a political earthquake in California, and so I genuinely would expect the Legislature to honor that vote and work with me to implement the agenda that I run on.' His supporters would include, he said, 'I don't want to say all Democrats, but many thoughtful Democrats, and so I would expect the Legislature to work with me to enact the will of the people.'
Hope is not a plan. More likely the post-Hilton election chaos would resemble what happened in 2003, when the last Republican to hold the office, Arnold Schwarzenegger, was elected after the recall of Democrat Gray Davis. The Legislature, backed by organized labor, opposed him at every turn. When Schwarzenegger tried to go around state lawmakers, whom he derisively referred to as 'girlie men,' to call a special election to implement his agenda, voters opposed all the ballot measures he supported in a special election in 2005.
The bad news for Hilton is that the California electorate has grown more lopsidedly Democratic since then. And, unlike Schwarzenegger, Hilton doesn't pack the persuasive charisma of a global superstar actor.
Similarly, Hilton would need to ask voters to reform the state's income tax structure, Hoene said.
'The flat tax piece of the proposal would likely have to be approved by voters, since the current income tax rates for higher-income taxpayers approved via Prop 30 and Prop 55 are in the Constitution through 2030,' Hoene said.
Translation: Hilton would have to ask voters, through state ballot measures, to roll back taxes on Californians who make more than $2 million that voters previously approved with Prop 30 in 2012 and Prop 55 in 2016.
It's easy to predict what the ads created by an opposition campaign to those measures will look like: 'Steve Hilton wants the rich to pay less in taxes.'
More troubling is what could happen if this plan were to be implemented. Hilton intends that the taxes would put more take-home money in the pockets of folks making less than $100K. But the economic disparities would start to widen once the flat tax takes effect. A flat tax means that every taxpayer pays the same percentage of income in taxes. So that means that someone making $10 million a year would pay the same percentage of tax as somebody pulling in $101,000.
Hilton told me his goal in creating this plan was to simultaneously 'accelerate our rate of growth so the jobs are created, and (make California) a more attractive place for people to invest, and we need to get immediate relief to workers. So that's the balance I'm trying to strike.' He wants big earners to 'not leave' the state because of its tax rate and instead remain here to build their businesses.
Hoene said, however, that Hilton's plan is a little too solicitous of rich folks.
'Hilton's state income tax proposal would provide the largest tax break to the highest income Californians and would cost the state tens of billions of dollars in revenue,' he said. 'That loss would have real consequences for every Californian, negatively impacting funding for schools, support for Californians' basic needs, public safety and other vital services.'
Cutting the income tax would mean taking billions of dollars off the table and deteriorating state services, Hoene predicted. That could lead to efforts to replace that lost revenue with 'more regressive taxes that do hit the lowest income people the hardest like sales and excise taxes.'
So keep all that in mind when you hear politicians pitching tax ideas that sound too good to be true. Because they usually are.