Would ‘wealth taxes’ convey huge bucks or spur exodus?

Would imposing “wealth taxes” on the richest Californians generate a cornucopia of revenues to fill gaps within the state funds, notably for companies to the poor?

Or would such levies, added to earnings taxes which can be already the nation’s highest, persuade extra rich Californians to desert the state, ala Elon Musk?

California voters may pose these questions if newly launched wealth tax laws makes it via the Capitol, together with a signature from Gov. Gavin Newsom, and seems on subsequent yr’s poll.

A phalanx of left-leaning legislators, led by Assemblyman Alex Lee, a San Jose Democrat, launched the brand new measures – a invoice and a constitutional modification – as a part of a nationwide drive by progressives for wealth taxes in California and different blue states. They hope that imposing wealth taxes on the state degree would spur a nationwide tax.

Lee and different advocates cite a 2021 ProPublica article that detailed how very rich People use loopholes within the federal tax system to keep away from paying billions of {dollars} in earnings taxes. “That is all within the spirit of constructing those that will not be paying their fair proportion pay what they owe,” Lee stated.

There’s an ironic ingredient to that rivalry in California. By happenstance, the wealth tax measures had been launched three days after the New Yorker journal revealed an article a couple of lawsuit alleging that two daughters of Gordon Getty, a San Francisco billionaire who’s Newsom’s shut buddy and monetary patron, used shell trusts based mostly in Nevada to keep away from paying thousands and thousands of {dollars} in California earnings taxes on earnings from cash Getty gave them.

Lee’s measure, Meeting Invoice 259, accommodates elaborate language geared toward stopping wealthy taxpayers from dodging wealth taxes, which might be initially imposed on these with a minimum of a billion {dollars} in web property – 1.5% annually – and later be prolonged to these with over $50 million at 1%.

The taxes can be levied on worldwide property, would hit rich taxpayers even when they left the state, and hefty penalties can be imposed for underpaying.

The primary query is whether or not Lee’s new invoice has any higher likelihood of successful legislative approval than his earlier model, which by no means acquired to first base. There are large Democratic majorities in each legislative homes, way over two-thirds, however many Democrats are leery of voting for brand new taxes.

A key ingredient is whether or not Newsom, who’s personally fairly rich due to the PlumpJack wine and restaurant enterprise he based with seed cash from Getty’s belief, would help such a measure.

Newsom has hinted that he’s involved about an exodus of rich taxpayers, who already present an enormous share of the state’s revenues. Final yr, he opposed a poll measure, Proposition 30, which might have hiked taxes on millionaires to help efforts to counter local weather change.

For the primary time, rich Californians actively opposed the measure, having remained passive when earlier tax-the-rich propositions had been positioned earlier than voters, and with Newsom’s added opposition, voters rejected it.

Even when the wealth taxes move the Legislature, voter approval of the constitutional modification is problematic. With doubtlessly billions of {dollars} at stake, a lavishly financed opposition marketing campaign is definite, that means proponents – notably public worker unions – must commit huge bucks as properly.

Furthermore, one other measure to hike earnings taxes on the rich is already ticketed for the 2024 poll. Its advocates, who need more cash for pandemic readiness, stayed off the 2022 poll to keep away from battle with Proposition 30.

It’s one other take a look at for an previous saying about Californians’ attitudes on taxes: “Don’t tax you, don’t tax me, tax the man behind the tree.”