If anyone raises the argument that rich taxpayers would escape California if taxes on them get higher and higher, the response is usually that there is no evidence that that would happen. Yet in the last week, there are clear indications from Democratic elected officials fearing that could happen. In California, the concern is expressed in a section of the newly introduced wealth tax, AB 2088.
Not long after an increase on income taxes on millionaires was introduced in the California legislature, a handful of liberal Democrats proposed a tax on accumulated wealth. If passed, it would be the first such tax in the country. It proposes to tax the fortune of the top .01% of California taxpayers whose wealth exceeds $30 million or $15 million for married couples filing separately, not including property directly owned by the taxpayer.
On top of the highest income tax in the nation—even if the new millionaire tax doesn’t take effect—the wealth tax should send rich individuals scurrying for the border.
Don’t buy it? Listen to the testimony of one nationally known Democratic elected official and the authors of the wealth tax itself.
I already wrote about New York governor Andrew Cuomo who made headlines this month when he pleaded for rich New Yorkers to keep their residences in New York City because 50% of that city’s income tax is funded by the top taxpayers.
On the idea that rich Californians may leave the state to avoid ever rising taxes on them, I call as witnesses the authors of the wealth tax bill: Assembly Members Bonta, Carrillo, Chiu, Gonzalez, Kalra, Santiago, Stone, Ting, and Wicks. Assembly coauthors include Chu and Jones-Sawyer and Senate coauthors include Skinner, Durazo and Lena Gonzalez.
They included a provision in the wealth tax bill to chase down residents who qualify for paying the tax but who left the state. Why would that provision exist in the bill if the authors didn’t think some taxpayers would try to avoid the wealth tax by leaving California?
Los Angeles Times deputy editorial page editor, Jon Healy, covered this point well in his column arguing against pursuing the wealth tax, “For starters, the bill would not only tax whole classes of things that had previously gone untaxed, it would dun nonresidents who are outside the reach of the state’s income and business taxes. That’s because the tax would also be imposed on former residents who left within the past decade, presumably to catch those who fled the state’s income tax rates, which already are the highest in the country.”
The provision of chasing down taxpayers in the wealth tax bill reinforces the notion that taxpayers escape to avoid higher taxes. The top income taxpayers have become the favorite target for a number of Democratic legislators pushed to raise taxes by their public employee union supporters.
If the taxes are raised, they want to make sure the potential revenue doesn’t disappear if taxpayers cry “enough” and take off.
One unfortunate side note to this whole affair is that the bill, AB 2088, was a gut and amend and the gutted bill originally put forth by Assembly members O’Donnell and Obernolte simply stated that no future ballot initiative would be labeled Proposition 13.
There are different reasons members might support the idea. One would be to honor the most famous initiative in California history, the property tax cutting measure of 1978. The second is to escape misperceptions by the voters because of the better-known Prop 13. Many supporters of Proposition 13 on the last March ballot to pass a school bond blame its failure on the belief voters were confusing the bond measure with the famous tax cutting initiative.
As I’ve written before, the idea to retire the number 13 from ballot propositions has a long history going back to the 1990s. Once again, an effort has failed.