The Return of the Foolish Wealth Tax – Press Enterprise
In the California government, bad ideas are like nightmares. They keep coming back even though they can’t survive the daylight.
One such idea is the “wealth tax,” a failed proposal that aims to “reduce wealth inequality” by taking an annual bite out of the wealth of people who are “obscenely ultra-rich,” according to the author of the latest version the bill.
Assemblyman Alex Lee, D-San Jose, complained that “there’s a whole different category of wealth where you just own things,” and income tax doesn’t capture any portion of it. So he has again put forward a proposal that would impose an annual tax of 1% on the global wealth of Californians with net worth of at least $50 million and 1.5% on the stocks of individuals with wealth greater than $1 billion -dollars would raise.
The proposed legislation is Assembly Bill 2289 and is supported by the California Federation of Teachers despite record spending on education in the current state budget. CFT President Jeff Freitas said in a statement, “California’s billionaires have astronomically increased their wealth since the pandemic began, while ordinary workers have struggled to pay their bills.”
But the differential impact of the pandemic restrictions is only the latest justification for redistributive tax systems in California, which already has the highest state income tax rates in the country. With a top tax rate of 13.3% for top-earning Californians, the argument that the rich aren’t paying “their fair share” is absurd.
When last year’s version of the “wealth tax” was considered, a California Policy Lab report on the alleged “CalExodus” found that the top 0.5% of California taxpayers accounted for 40% of state income tax revenues.
Although the researchers said they found no evidence of a “pronounced” exodus from the state and “little” evidence that wealthy Californians were leaving “en masse,” they found that “a single billionaire’s decision to leave the state , being oversized could impact the treasury.”
That makes an annual tax on the global wealth of wealthy citizens a deeply stupid idea. It’s an engraved invitation for wealthy residents to leave the country and, just as important, it’s a huge drag for entrepreneurs to base their startups in California. This hurts job creation, and the lack of good jobs in the state exacerbates income inequality. California has the highest poverty rate in the country, with more than 15% of the state’s residents living in poverty.
The solution does not lie in confiscatory taxation. It can only be found in broad-based economic growth. Leaders should focus on fostering the conditions for job creation, rather than proposing counterproductive proposals dripping with stale left-wing rhetoric.
To the frustration of progressives who support the idea of a wealth tax, the idea cannot get off the ground in progressive California. Last year’s version of the wealth tax bill didn’t even have a Legislative Committee hearing. Gov. Gavin Newsom has not supported the idea of yet another tax hike for California’s wealthiest.
One of California’s most famous billionaires, Elon Musk is now a Texas billionaire after moving his company’s headquarters from Palo Alto to Austin. Texans are going to have these high-paying jobs now, and they’re going to pay the Texas state income tax rate of zero.
It’s a cautionary tale for California lawmakers, or it should be.
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