Democratic lawmakers in California have proposed two new tax tiers for the state’s ultra-high-net-worth individuals. The bill, introduced last week by Assemblymember Alex Lee (D-San Jose), will target all households worth over $50 million with a 1% annual wealth tax, while households worth over $1 billion will pay 1.5%. Unlike previous efforts at crafting a wealth tax, it targets accumulated wealth, not merely income.
Such a tax could raise over $22 billion in revenue for the state, according to an analysis by University of California Berkeley and Davis professors. However, its ability to pass may be stymied by the state’s existing tax-rate limit of 0.4%. Voters would have to specifically approve a measure to surpass that limit if the tax was to become law, and some fear that even the mere threat of higher taxes would be enough to spook California’s billionaires into fleeing for less pricey pastures.
Still, California has more billionaires than any other US state, and according to Lee, the state is actually gaining high-income residents. He insisted in a recent interview with Fox News that while some might claim the state is hemorrhaging wealthy people – Tesla tycoon and world’s richest person Elon Musk did just move his electric car factory from Palo Alto to Texas – it’s really the poor and middle class who are leaving, priced out of their communities by ever-soaring rents and gentrification.
“With a tax on the ultra-wealthy who pay a lower effective tax rate than the bottom 99%, we can invest in our schools, tackle homelessness, expand needed services, and much more,” Lee continued. Parts of California – specifically the cities of San Francisco and Los Angeles – have become notorious for their homelessness problem, with sprawling tent cities abutting million dollar homes.
Lee has tried to get a wealth tax passed before, to no avail. An effort to introduce nearly identical legislation last year ended with the bill dying before it could even be heard in committee. Should he and the bill’s co-authors finally convince Californians their state needs a wealth tax, the measure would take effect in 2023 for billionaires and in 2025 for households worth over $50 million.
California is also home to some of the wealthiest lawmakers in the land. Some twenty millionaires represent California in the US Congress, including House Speaker Nancy Pelosi and Senator Dianne Feinstein, both Democrats.