“Tax the rich!” is a popular refrain these days amid growing concerns over the widening “wealth disparity” in the United States (among other First World nations).
This has prompted several efforts in Congress to pass legislation imposing a national “wealth tax.” For a variety of reasons, however, these proposals have failed to gain traction in Washington.
But far from abandoned, wealth tax campaigns have filtered down to various state governments. And that includes a potential added tax on the Golden State’s wealthiest residents, too.
California “Wealth Tax” Takes Root
California and a handful of other traditionally “blue states” are now entertaining “wealth tax” legislation.
San Jose assembly member Alex Lee recently announced plans to introduce a bill imposing an additional 1.5% on California residents worth over $1 billion. If passed, this new tax would take effect in the 2024 fiscal year.
Lee’s proposal also includes another 1% additional tax on Californians worth over $50 million. But this hike wouldn’t take effect until 2026.
How Much Additional Revenue Would The “Wealth Tax” Generate?
According to Lee’s projections, the proposed wealth tax would take in an additional $21.6 billion in annual state tax revenue.
Who Would Be Affected By The Proposed “Wealth Tax?”
Lee also claims the proposed wealth tax would only impact approximately 0.1% of all California households.
Proposed Wealth Tax Encompasses Taxpayer’s “Worldwide Wealth”
An interesting feature of Lee’s proposal is that it aims to look beyond a taxpayer’s annual state income.
The new regulations would also tax the calculated value of other holdings, including stocks and hedge fund interests, farm interests, and arts and collectibles. And these assessments would steadily increase based on the rising value of such assets.
What’s The Likelihood of This Legislation Passing?
If recent history is any indicator, Lee’s proposed tax legislation is a losing gambit.
Two measures on the ballot in November — the “electric car tax” and another tax intended to bring in additional revenue to fund post-pandemic healthcare — aimed at California’s wealthiest citizens both failed.
These measures tanked partly because Governor Newsom, who broke with Democratic party ranks, opposed both initiatives.
And odds are, Newsom will continue to oppose policies directly hostile to the wealthy donors whose funding helped sweep him into office.
Without the governor’s support, not to mention opposition from wealthy Californians (an elite and powerful group), Lee’s legislation faces an incredibly stilted uphill battle.
Tax Time is Quickly Approaching… Are You Prepared?
A “wealth tax” will likely have no barring on your income tax filing.
But regardless, tax time is upon us. And if you haven’t already scheduled your annual appointment — Now’s the time! Get in touch ASAP to schedule your appointment!