A bill that would impose a “worldwide wealth” tax on wealthy people even after they leave the state was introduced by California lawmakers.
For residents’ worldwide net worth that exceeds $1 billion in the tax years 2024 and 2025, the measure, presented by California Democratic Assembly member Alex Lee, would impose a 1.5% tax. A resident’s global net worth over $50 million would be subject to an additional 0.5% yearly tax, and their global wealth exceeding $1 billion would be subject to an additional 1% annual tax.
“With this modest tax on the ultra-wealthy who pay a lower effective tax rate than the bottom 99%, we would have sustained investments in our schools, tackle homelessness, maintain and expand needed services, and much more. We’ve been losing our lower and middle-income residents that are being priced out of this state because they can’t afford the high cost of living while shouldering the burden of paying for our roads, infrastructure, and schools all the while the ultra-wealthy doubled their fortunes during the pandemic,” Lee said in a press release
Wealth taxes are based on an individual’s assets, as opposed to income taxes, which simply require payment of a specified percentage of net income. Current and former residents would have to pay based on the value of stocks, savings accounts, arts, and collectibles, real estate, pension funds, financial assets held offshore, and several other assets, in the case of the California bill as Wealth taxes are based on an individual’s assets; unlike an income tax, under which an individual only pays a certain portion of new income.
An equation that weights the number of years a person lived in California out of the past four years would be used to determine how much of their wealth is subject to the tax. The numerator and denominator would be zero for new residents and one and two, respectively, for the next two years.
The numerator would be a fraction between zero and one “based on the percentage of days in the year the taxpayer was present in the state, plus the years of residence over the three previous taxable years,” with the numerator gradually decreasing in later years for a taxpayer who is “no longer a resident” and “does not have the reasonable expectation to return to the state.”
In an interview with Fox Business, Joe Lonsdale, a venture capitalist, and businessman who recently relocated from California to Texas expressed his strong opposition to the proposal.
He said, “This is really more a theatrical production going on in California. The state’s a total mess. And what they’re doing here is they’re signaling something crazy, and they’re probably going to compromise and tax the billionaires more some other way. But it’s really ridiculous.”
Following the presentation of California Proposition 30, which would have increased taxes on personal income by over $2 million by 1.75% in order to improve funds for infrastructure for zero-emission vehicles and wildfire prevention, the proposal was then made. In the midterm elections, voters rejected the measure 58% to 42%.
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Sources: DailyWire, Taxfoundation.org, FoxBusiness, A24.asmdc.org, Legiscan