California Democrats are once again floating the concept of placing an onerous wealth tax on its most successful residents, even if they no longer live in the state. The move will likely incur the wrath of other states and go to the Supreme Court.
Alex Lee, a Democrat assemblyman, introduced California Assembly Bill 259 last Friday, co-sponsored exclusively by fellow Democrats. The bill proposes to “impose an annual tax at a rate of 1.5% of a resident of this state’s worldwide net worth in excess of $1,000,000,000, or in excess of $500,000,000 in the case of a married taxpayer filing separately.”
The bill uniquely taxes so-called “worldwide net worth” which includes:
- Stock in any publicly and privately traded C-corporation.
- Stock in any S-corporation.
- Interests in any partnership.
- Interests in any private equity or hedge fund.
- Interests in any other noncorporate businesses.
- Bonds and interest-bearing savings accounts.
- Cash and deposits.
- Farm assets.
- Interest in mutual funds or index funds.
- Put and call options.
- Futures contracts.
- Art and collectibles.
- Financial assets held offshore.
- Pension funds.
- Other assets, excluding real property.
- Debts other than mortgages or other liabilities secured by real property.
- Real property.
- Mortgages and other liabilities secured by real property.
Even the “assets of a person who can be claimed as a dependent that are in excess of fifty thousand dollars ($50,000), shall be deemed to be assets of the taxpayer who can claim them as a dependent,” meaning if a parent purchases a new car for their 17-year-old, it is considered to be taxable as wealth.
Lee held a press conference Monday regarding AB259 and Assembly Constitutional Amendment 3 calling upon the legislature “to bring tax justice.”
He tweeted, “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”
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
Lee told CBS News, “Our current taxation system is inadequate; it’s not very successful at taxing the ultra-wealthy,” he said. “Mark Zuckerberg or Larry Page can largely avoid the California income tax” unless they sell their stock.
A similar bill was introduced in 2020 but failed to pass the California Senate, despite it being Democrat-controlled.
In a move that is certain to create a Constitutional challenge, the new bill allows California to pursue wealth taxes even on former residents who haven’t lived in-state for years, according to Fox News,
Fox wrote that the bill “includes provisions to create contractual claims tied to the assets of a wealthy taxpayer who doesn’t have the cash to pay their annual wealth tax bill because most of their assets aren’t easily turned into cash. This claim would require the taxpayer to make annual filings with California’s Franchise Tax Board and eventually pay the wealth taxes owed, even if they’ve moved to another state.”
“The working class has shouldered the tax burden for too long,” Lee tweeted. “The ultra-rich are paying little to nothing by hoarding their wealth through assets. Time to end that.”
The ultra rich are paying little to nothing by hoarding their wealth through assets. Time to end that https://t.co/DadERQTgiK
— Alex Lee 李天明 (@alex_lee) January 20, 2023
Lee even claimed a “modest” 1 percent tax on assets over $50 million would generate approximately $22 billion per year which would nearly eliminate California’s budget deficit.