Income Tax Indexing

INCOME TAX INDEXING. INITIATIVE STATUTORY AMENDMENT. Under existing Personal Income Tax Law, graduated state income tax brackets are adjusted annually by applying an inflation adjustment factor through use of the percentage change in the California Consumer Price Index. This is commonly referred to as indexing . Under existing law, the full percentage change in the Index is used for the 1980 and 1981 taxable years, and the Index percentage changes, less 3%, for 1982 and later taxable years. This measure changes existing law by providing that the full percentage Index changes shall be used for 1980 taxable .year arid years thereafter. Fiscal impact on state and local governments: Reduce state revenues in excess of $200 million in 1982-83 and $400 million in 1983-84. This revenue loss would grow significantly in sUbsequent years. Under existing law, reduction in state revenues would result in corresponding reductions in state payments to local governments and schools