Fox News Digital reported that a bill was introduced by progressive California legislators last week, which would impose an annual tax on wealthy residents even if they fled the state.
Assemblyman Alex Lee (D), and nine other state Democrats sponsored the legislation. It would require California residents who have a “worldwide wealth” of more than $1 billion to begin paying an additional 1.5% annual tax in January 2024. The tax threshold could be reduced to $50 million by a 1% annual tax as early as 2026.
Lee posted on Twitter, “Billionaires don’t pay what they owe and still enjoy public investments to build their empires.” “To bring about tax justice #TaxTheRich, my colleagues and colleagues in 7 other states have introduced Wealth Taxes,” Lee wrote on Twitter.
Billionaires aren’t paying what they owe while enjoying public investments to build their empires. My colleagues today and colleagues from 7 other states are introducing Wealth Taxes to bring tax justice#TaxTheRich pic.twitter.com/XXFOJx3D3Z
— Alex Lee 李天明 (@alex_lee) January 24, 2023
“Worldwide net wealth” refers to assets that go beyond an annual income. These include farmland, art, stocks, and interest in hedge funds.
The legislation contains provisions that impose contractual rights on residents’ assets. These claims would be subject to payment regardless of whether they move out.
Last week, Connecticut, Hawaii, Illinois, Maryland, Minnesota, New York, and Washington proposed similar legislation to tax wealthy residents.
Lee claims that if the bill is passed, the tax will apply to 0.1% of California households and generate $21.6 million in state revenue. Lee plans to use the new annual wealth tax as a way to reduce the $22.5 billion state budget deficit.
Lee explained to the Los Angeles Times that this is how they can continue addressing their budgetary problems. “Basically, we could plug all the holes.”
Critics believe that the legislation would drive California’s richest residents out of California.
Jared Walczak (Vice President of State Projects at Tax Foundation), stated that the proposed California wealth tax was economically harmful, difficult to administer, and would drive wealthy residents and their tax payments out of state. The bill allocates $660 million annually for administrative costs. This is more than $40,000 per potential taxpayer. It gives an idea of the difficulty of administering such a tax.
Fox News Digital spoke to Patrick Gleason (Vice President of State Affairs at Americans for Tax Reform), about how the Democrat legislators believe they can “get around the problem of Californians moving” by trying to tax people “even after they leave the state.”
Walczak and Gleason argued that the legislation was unconstitutional.