California lawmakers pushing wealth tax to raise revenue, may lead to exodus.
The California State Legislature is considering a bill that would impose a new 1.5% tax on those with a “worldwide net worth” of more than $1 billion, starting in 2024. The tax would drop to 1% for those with a worldwide net worth of more than $50 million. The bill would also allow the state to impose taxes on residents even after they have left the state. This is a modified version of a wealth tax that was approved in the Assembly in 2020, but not passed by the Democrat-led Senate.
The bill is sponsored by progressive Democrat Assemblyman Alex Lee, and is intended to generate an additional $21.6 billion in state revenue, which would go to the state general fund. Lee has argued that the money could help address California’s massive budget deficit and fund schools, housing, and other social programs.
However, experts have argued that the bill could have the opposite effect by causing an exodus of wealthy residents from the state, as well as high administrative costs. They also noted that the proposed wealth tax would be difficult to administer and legally questionable.
California is not alone in this effort, as several other blue states have proposed similar bills to impose new wealth taxes. These states are Connecticut, Hawaii, Illinois, Maryland, Minnesota, New York and Washington. Each state’s proposal contains a different tax approach, but they all center around the same basic idea: the rich must pay more.
Proponents of wealth taxes argue that they are necessary to combat economic inequality. However, opponents argue that such taxes could be economically destructive, as they would reduce investment returns, slow innovation, and lead to fewer investments. They also point out that the top 1% of taxpayers already pay about 50% of state income taxes in states like California and New York.
In summary, the California State Legislature is considering a bill that would impose a new wealth tax on the state’s wealthiest residents. The bill is sponsored by progressive Democrat Assemblyman Alex Lee and is intended to generate additional revenue for the state. However, experts have argued that the bill could have unintended consequences, such as an exodus of wealthy residents and reduced investment returns. While other blue states have proposed similar bills, the legality of such an approach is questionable. Supporters of wealth taxes argue that they are necessary to combat economic inequality, while opponents argue that they could be economically destructive.