California is a trend setter, at least when it comes to economic policies. The state has the biggest population and economy, so it’s a natural leader on things like this. Buuuuut…maybe we don’t always want to follow down their path.
Here are Five Fast Facts about California’s new wealth tax:
- 📝 The Details - A new law adds a 1.5% tax on the total net worth (anywhere in the world) of billionaires living in the state. It would even include private businesses and assets outside the state. That’s not invasive at all, right?
- 😲 The Reason - The law aims to fill a $68 billion budget gap for the state, but even if it works as planned it’ll only raise about $22 billion. More on that in a moment…
- 🤔 The Exclusions - Oddly enough, lawmakers carved out exclusions for real estate so rich people looking to dodge the tax can shift their money. Also, there are sweeteners for attorneys to sue the rich for under-reporting their assets…and they get a cut of whatever is recovered. Surely this isn’t a naked pander to people who tend to donate to politicians, is it? Nah, probably not.
- 💨 The Problem - The big problem here is that as taxes on the wealthy go up…the wealthy go somewhere else. If you don’t think that happens, you’re fooling yourself. Also, we’d like to sell you this invisible container full of invisible gold over here. And oh, by the way, the law will chase you down and force you to pay even if you leave, so there’s that, too.
- 📈 The Tipping Point - The reality is that the wealthy pay most of the California’s taxes - the top 1% pay 50% of ‘em, and the top 10% pay a whopping 80%! California has the highest tax rate in the nation and has been shedding population since 2019, with hundreds of thousands of those being the wealthy. This isn’t helping the wealth tax math at all. Neither is the $27 billion increase in Medicaid spending increases (which will only go up with all the new “residents” flooding in). And this still doesn’t address the $46 billion gap that still exists to fix the state’s budget.
🔥Bottom line: You’re probably thinking it’s just billionaires, and it’s just in California. True…for now. But remember, California is a trend setter, and if other states see them do it, it’s just a matter of time until it happens elsewhere. As for the billionaire thing, well, that’s just talking about thresholds for the pain. We might suggest that rather than argue about the proper threshold for a painful thing…maybe you just shouldn’t do the thing at all. It just begins the trip down a slippery slope that will eventually include you.
What do you think about this wealth tax?
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