SACRAMENTO, CA. - California lawmakers are pushing to impose higher taxes on the state's wealthiest residents, even those who have since moved away.
Assemblyman Alex Lee, a progressive Democrat, last week introduced a bill that would levy an annual 1.5% 'worldwide net worth' tax on those with more than $1 billion in assets as early as 2024. The threshold for taxation would drop the following year to include anyone with over $50 million in global assets, which would still be subject to the 1.5% rate for billionaires.
The proposed 'exit tax' is not without precedent in California but features a new mechanism to ensure wealthy taxpayers who do not have enough cash on hand pay their wealth tax bills—allowing the state to create contracts tied to their assets.
If enacted, this bill could generate an estimated $21.6 billion in revenue for the state's general fund, which could help address its current $22.5 billion deficit and fund social programs such as housing and education initiatives.
Lee has been incredibly vocal about his support for taxing the rich, saying recently on Twitter that "the working class has shouldered the tax burden for too long" and that it is "time to end that." However, Lee's office also believes this measure will not affect many people due to its narrow scope; only 0.1% of California households will be affected by this tax increase.
Other blue states have followed suit and introduced their versions of similar wealth taxes, including Connecticut, Hawaii, Illinois, Maryland, Minnesota, New York, and Washington—all hoping to raise additional funds for essential services during times of crisis like the one we are currently experiencing due to Covid-19 illness pandemic.
The concept of taxing wealthy individuals or entities at higher rates than others is not without controversy. Critics argue that such measures punish success and stifle economic growth while failing to solve any budget woes in the long run because they do not address underlying structural issues within government spending habits and policies.
However, supporters counter this argument by claiming these taxes are necessary as a form of social justice given income inequality disparities among different classes of people in our society—which can only be rectified through new revenue streams created by levying more taxes on those more able financially contribute more toward collective relief efforts during these difficult times.
It remains unclear whether Lee's legislation will pass both houses of the Californian legislature later this year. However, taxing wealthier citizens is gaining traction across many states nationwide as governments seek additional resources amid widespread economic hardship caused by 2020 pandemic-related lockdowns and restrictions on daily activities.
Whether or not these measures prove successful overall remains yet another open question — one which will likely be determined in part by how much public opinion shifts over time towards accepting higher taxes being imposed upon those with greater financial means moving forward into 2021 and beyond.