Progressive lawmakers in Sacramento are pursuing an aggressive wealth tax targeting California’s richest residents, including those that depart for other states.
The move comes as California has led the nation in taxing its wealthiest residents based on income, to the tune of billions in budget surpluses. Now, lawmakers are targeting the underlying wealth, too.
Driving the news: Asm. Alex Lee (D–San Jose) reintroduced a new version of the wealth tax bill on the floor last week that would increase taxes on “rich” Californians. Similar bills have been introduced in the past, but what makes this version unique is it allows California to charge a wealth tax on residents who have even left the sate and reside elsewhere.
- Along with California, last week Connecticut, Hawaii, Illinois. Maryland, Minnesota, New York, and Washington brought wealth tax bills to the floor with the common goal being to tax the rich.
- The bill was introduced, according to Lee, in hopes to generate roughly $21.6 billion in state revenue from the 0 1 percent of Californians that the tax would effect. This would majorly address the $22.5 billion budget deficit that the state is facing today.
By the numbers: If approved, the bill would affect an estimated 23,000 “ultra-millionaire” and 160 billionaire households.
- The California Wealth Tax, if passed and signed into law, would take effect in as early as 2024. Starting January 2024, California would issue an annual 1.5 percent tax on state citizens whose “worldwide net worth” is above $1 billion.
- Following, in as early as 2026, the threshold for being taxed would significantly drop. This would cause those individuals whose “worldwide net worth” is $50 million to only be taxed 1 percent, as opposed to billionaires who are taxed at 1.5 percent.
What they’re saying: Lee advocates for the rich in California to pay more, while battling against the criticism from key tax opponents who argue that targeting ex-Californians who move out of state could be unconstitutional.
- Lee tweeted “The working class has shouldered the tax burden for too long, the ultra-rich are paying little to nothing by hoarding their wealth through assets. Time to end that.”
- “It brings significant administrative challenges with respect to asset and liability valuation, high and distortionary effective rates, among other problems that make it an inefficient revenue source,” American Action Forum fiscal policy director Gordon Gray told Fox News.
- “The proposed California wealth tax would be economically destructive, challenging to administer and would drive many wealthy residents and all their current tax payments out of state,” The Tax Foundation’s Jared Walczak said.