California lawmakers appear intent on making the Eagles song Hotel California a reality .. . at least when it comes to taxes for those who try to flee the state. At the Hotel California, “you can check-out any time you like, but you can never leave!” With soaring costs and a massive $24 billion deficit, the state is also facing an exodus of people leaving the state. The solution? Not only impose a wealth tax (which will fuel even more departures) but pursue those who left the state.
The new bill introduced by Democratic Assemblyman Alex Lee would impose an extra annual 1.5% tax on those with a “worldwide net worth” above $1 billion, starting as early as January 2024.
The law has a cynical bait-and-switch provision. The billionaire tax is just meant for the initial packaging and passage. It can therefore be sold as a “billionaire’s tax.” However, in two years, the threshold drops to a worldwide net worth exceeding $50 million. While billionaires would stay at 1.5%, those in the lower tax bracket would be hit by a 1 percent added rate on worldwide assets.
It also includes the taxation on those who led the state . . . many due to the high taxes. California already has the highest tax burden in the nation. It relies on its top 1% of taxpayers for roughly half of its individual income tax revenue, but continually treats those taxpayers like game in a canned hunt. The result, not surprisingly, is that they are leaving for states like Texas and Florida.
The new tax would arrange for payments to California’s Franchise Tax Board for years after a departure for those assets which are not easily converted into cash.
I have previously written how the wealth tax pushed by Democrats like Sen. Elizabeth Warren are unconstitutional under the federal Constitution. States are not subject to the same limit. Not surprisingly, the highest taxing states are pursuing the most wealthy . . . who are leaving in droves. That includes Connecticut, Hawaii, Illinois, Maryland, Minnesota, New York and Washington.
Under the existing exit tax, businesses and individuals must pay a one-time tax to leave based on the value of the business or individual’s assets, including property, stocks, and other investments. For those who have earned more that $30 million, you can continue to pay for years after fleeing the state. The current exit tax is 0.4% of an individuals’ net worth over $30,000,000 in a tax year, including assets located outside of the California other than real estate.
Taxing wealth is no easy matter so the proposal seeks $660 million per year for administrative costs.
California is also considering constitutional amendments and referendums to increase taxes for the most wealthy.
Last thing I remember, I wasRunning for the door I had to find the passage back To the place I was before “Relax, ” said the night man “We are programmed to receive You can check out any time you like But you can never leave”