A new so-called wealth tax in California would send tax bills even to people who have moved out of the liberal state.
The Democrats’ proposal for “an annual tax of 0.4 percent upon the worldwide net worth of every resident in this state,” according to the text of AB 2088, which would create the tax on a vast list of untaxed assets California wants to tax.
The tax would target not only current residents but anyone who has what the bill classifies as wealth and who has lived in California any time in the past 10 years. It would use a sliding scale based on the number of years a taxpayer lived in the state.
Jon Healey, the deputy editorial page editor of the Los Angeles Times, cast a jaundiced eye upon the proposal in an Op-Ed in which he noted that “the tax would also be imposed on former residents who left within the past decade, presumably to catch those who fled the state’s income tax rates, which already are the highest in the country.”
“It also would apply the highest wealth-tax rate to anyone who’d spent a decade or more in California, a bizarre choice that would only increase the incentive for longtime residents to move out,” he wrote.
Healey argued that the tax was a bad idea because there are huge uncertainties about how it would work.
“Then there are questions about how to value assets that aren’t on the market, such as a business you own that isn’t listed on the stock market,” he wrote. “The bill calls on the Franchise Tax Board to come up with a way to value non-publicly-traded assets, yet the tax would go into effect immediately.
“Nor is it at all clear how the state would enforce against the many, many ways that wealthy people would find to avoid the tax.”
Healey’s bottom line was that “it makes no sense for lawmakers to try to solve those problems by enacting a wholly new type of permanent tax with no study and no clue as to its potential unintended consequences.”
The proposal caused a stir on Twitter.
California proposed a .4% annual wealth tax that applies to former residents who already left within the past 10 years, and to current residents for ten years after they leave. The rate is reduced by 10% for each year of absence. Any wealthy person who moves into Cal. is nuts.
— Peter Schiff (@PeterSchiff) August 15, 2020
You can check out anytime you like, but your money can never really leave.
Even if you move, this new bill would continue to tax you in your new state for 10 years. https://t.co/qru3UjtnxO
— Senator Melissa Melendez (@senatormelendez) August 15, 2020
California sharpens legislative knives as it prepares to slaughter its golden goose:
✅New wealth tax would target *all* wealth held worldwide
✅Residents still liable for 10 years (!) after fleeing state
✅Includes unrealized gains, start-ups pre-IPO etchttps://t.co/wZ8H6Ok6Zq
— skepticalifornia (@skepticaliblog) August 13, 2020
Democratic Assembly member Ron Bonta said the state needs the cash.
“The California Wealth Tax would add critically needed revenue for California by creating a more equitable tax structure,” he said, according to East County Today.
Bonta said the tax, which impacts those with wealth at over $30 million, would affect about 30,400 people.
“Families are hurting right now,” he said. “COVID-19 has only made matters worse. In times of crisis, all Californians must step up and contribute their fair share. Asking these well-resourced Californians to give a little more to keep our people working and support our most vulnerable is the right thing to do.”
Other Democratic supporters of the bill said it was simply a matter of fairness.
“It is long past time that California had an equitable tax structure that allows us to provide for all Californians,” Assembly member David Chiu said.
“We are at a very critical point in time where if we don’t start putting dollars where our values are, we will see unprecedented devastation in our communities. We need people to start pulling their own weight here, and it starts with the ultra-rich,” Assembly member Miguel Santiago said.
Republican state Sen. John Moorlach was a dissenting voice, saying higher taxes would send those who have the means to move out of the state.
“We already have the highest personal income tax rate in the nation,” Moorlach said, according to the Sacramento Bee.
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