However, in two years, the threshold drops to a worldwide net worth exceeding $50 million. While billionaires would stay at 1.5%, those in the lower tax bracket would be hit by a 1% added rate on worldwide assets.
It also includes the taxation on those who left the state . . . many due to the high taxes.
You think just plain folks are safe? Just wait a while. The amendment was passed by Congress in 1909, ratified by the states, and took effect on Feb. 25, 1913. That first year, less than 1% of the population paid income taxes. The rate: 1% of net income.
California lawmakers appear intent on making the Eagles song Hotel California a reality … at least when it comes to taxes for those who try to flee the state. At the Hotel California, “you can check-out any time you like, but you can never leave!” With soaring costs and a massive $24 billion deficit, the state is also facing an exodus of people leaving the state. The solution? Convert the state into a tax Venus flytrap: not only impose a wealth tax on those caught in the state but tax those who try to leave.
The new bill introduced by Democratic Assemblyman Alex Lee would impose an extra annual 1.5% tax on those with a “worldwide net worth” above $1 billion, starting as early as January 2024.
The law has a cynical bait-and-switch provision. The billionaire tax is just meant for the initial packaging and passage. It can therefore be sold as a “billionaire’s tax.” However, in two years, the threshold drops to a worldwide net worth exceeding $50 million. While billionaires would stay at 1.5%, those in the lower tax bracket would be hit by a 1% added rate on worldwide assets.
It also includes the taxation on those who left the state . . . many due to the high taxes. California already has the highest tax burden in the nation. It relies on its top 1% of taxpayers for roughly half of its individual income tax revenue, but continually treats those taxpayers like game in a canned hunt. The result, not surprisingly, is that they are leaving for states like Texas and Florida.
The new tax would arrange for payments to California’s Franchise Tax Board for years after a departure for those assets which are not easily converted into cash.
I have previously written how the wealth tax pushed by Democrats like Sen. Elizabeth Warren are unconstitutional under the federal Constitution. States are not subject to the same limit. Not surprisingly, the highest taxing states are pursuing the most wealthy . . . who are leaving in droves. That includes Connecticut, Hawaii, Illinois, Maryland, Minnesota, New York and Washington.
What is most striking under the proposed law is that it will not only spur more wealthy couples to leave the state but discourage any from moving into the state. Even if this ill-considered law does not pass, who wants to risk going to a state that is actively pursuing new ways to tax you even if you ever decide to leave? With many in the top one percent getting out of the state, the tax demand on the most wealthy is only likely to increase with the dwindling numbers in the top tax brackets. No one wants to be the last buffalo on the plains for the California tax collectors.
Under the existing exit tax, businesses and individuals must pay a one-time tax to leave based on the value of the business or individual’s assets, including property, stocks, and other investments. For those who have earned more than $30 million, you can continue to pay for years after fleeing the state. The current exit tax is 0.4% of an individuals’ net worth over $30,000,000 in a tax year, including assets located outside of California other than real estate.
Taxing wealth is no easy matter so the proposal seeks $660 million per year for administrative costs.
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