California Democrats are considering imposing a wealth tax even on people who have moved out of state

Democratic lawmakers in California are pushing a bill that would tax the state’s richest residents, even those who have already moved to another part of the country.

Assemblyman Alex Lee, Progressive Democrat, introduced last week check in the California State Legislature which will impose an additional 1.5% annual tax on those with “global net worth” in excess of $1 billion starting in January 2024.

In 2026, the threshold for paying taxes will be lowered: those with a global net worth of more than $50 million will be subject to an annual wealth tax of 1%, while billionaires will still pay a tax of 1.5%.

Global wealth goes beyond annual income to include a variety of assets such as agricultural assets, art and other collectibles, as well as hedge fund stocks and interests..

The law is a modified version of the inheritance tax passed by the California Assembly in 2020, which the Democratic-led state Senate refused to pass.

Exit taxes are not new to California. But the bill also includes provisions to create contractual claims related to the assets of a wealthy taxpayer who does not have the cash to pay their annual property tax bill because most of their assets are not easily converted into cash.

This requirement would require the taxpayer to file annual returns with the California Franchise Tax Board and eventually pay all property taxes due, even if they moved to another state.

California was one of several Democratic-led states that introduced bills last week to introduce new wealth taxes.

The other states were Connecticut, Hawaii, Illinois, Maryland, Minnesota, New York, and Washington. Each state’s proposals contained different approaches to taxation, but they all focused on the same basic idea: the rich should pay more.

“The working class has carried the tax burden for far too long,” Lee tweeted. “The super-rich pay little or nothing to accumulate their wealth through assets. It’s time to end this.”

The tax will affect 0.1% of California households and generate an additional $21.6 billion in state revenue that will go into the state’s general fund, Lee said. California has one of the highest taxes in the country.

Proponents argue that the money could increase funding for schools, housing, and other social programs. But perhaps most importantly, Lee hopes to help solve California’s massive $22.5 billion budget deficit.

Wealth taxes can be devastating as budding business owners can be taxed on hundreds of millions of dollars in estimated trading value.

“This is how we can continue to address our budget issues,” Lee said in an interview with the Los Angeles Times. “Basically, we could plug the whole hole.”

However, experts counter that the bill would have the exact opposite effect of high administrative costs and cause an exodus of people fleeing the state.

“It comes with significant administrative issues around asset and liability valuation, high and skewed effective rates, and other issues that make it an inefficient source of revenue,” said Gordon Gray, director of tax policy at American Action, Fox New Digital. .Forum.

Others have echoed this view, also arguing that the new wealth tax is likely to drive out many wealthy Californians.

“The proposed California property tax would be economically disruptive, difficult to administer, and force many wealthy residents and all of their current tax payments out of the state,” Jared Walchak, Vice President of State Projects at the Tax Fund, told Fox. NewsDigital.