, dubbed The California Tax on Extreme Wealth, would impose an annual 1% tax on net worth over $50 million, and a 1.5% tax on net worth over $1 billion. It would also require a to increase the state鈥檚 current wealth tax cap.
A UC Berkeley found the proposal would generate an estimated $22.3 billion a year.
Moderate lawmakers warn California鈥檚 wealthiest already pay a significant share of the state鈥檚 income tax, and additional tax burdens could drive them out. Progressives, meanwhile, say a wealth tax is the best way to close California鈥檚 yawning economic equality gap.
鈥淲e have seen that the rich get hideously richer, and that has not bated even during a global pandemic,鈥� said Assemblymember Alex Lee of San Jose, the bill鈥檚 lead author.
鈥淪o, we鈥檙e really asking, who can pay their fair share?鈥�
Governor Gavin Newsom has previously he would not support a wealth tax.
Income and wealth taxes are different. The former is a tax on an individual鈥檚 annual earnings; the latter is applied to the money and assets an individual owns.
The bill would not apply to real estate, since California already has a property tax. But the state would calculate a person鈥檚 wealth based on 鈥渨orldwide net worth.鈥� That means residents could not simply avoid the tax by parking money overseas.
A more modest wealth tax died in the Legislature last year.
Assemblywoman Cottie Petrie-Norris (D鈥揕aguna Beach) is one of several moderate Democrats who say the proposal is unworkable.
鈥淭here is a narrative that the rich don鈥檛 pay their fair share of taxes, but in California, largely they do,鈥� she said.
She notes that comes from the top 1% of earners.
鈥淭hat is billions of dollars for schools, for health care 鈥� for programs that help all Californians,鈥� she added.
Moderate Democrats say imposing a wealth tax could drive out ultra-rich residents, and as a result drive down tax revenues. They point to high-profile figures who decamped from the Golden State in recent months, Elon Musk. However, it appears he be moving Tesla out of state.
It鈥檚 an argument that progressives reject. According to the UC Berkeley study, California has increased its already disproportionate share of the country鈥檚 millionaires and billionaires since 2011, in spite of some recent high-profile departures.
Assemblymember Lee said the bill would allow the state to continue collecting taxes on an individual鈥檚 wealth for a few years after they move out of the state.
He also notes that the tax would not apply to wealthy people who move to California during their first year of residency. Instead, it would be applied gradually over five years.
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