Would Californians support a billionaire wealth tax?

from Dan WaltersCalMatters

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In a way, California has been taxing wealth since it became a state 175 years ago.

In the 20th century, the state relied on taxation of land and buildings, which in this agrarian period were the main forms of personal wealth. Eventually, the state imposed other taxes, and by the 1930s property taxes exclusively funded local services.

Today, despite the cap on property taxes imposed by Proposition 13 of 1978, levies on nearly $9 trillion in taxable real estategenerates about $98 billion in revenue each year. The money is distributed roughly between school districts and local governments.

Despite these huge numbers, real estate no longer dominates the personal wealth of Californians, which now exceeds $30 trillion. About a third is residential real estate, with the rest being commercial real estate, investments, personal property, and cash.

There are estimated to be about 200 billionaires in California, who collectively have about $2 trillion in net assets, or roughly 7 percent of Californians’ wealth — overwhelmingly business investments, especially in technology.

So, should estate taxation be supplemented by siphoning off other assets of the state’s billionaires? Voters may decide this year because a wealth tax initiative distributed by a union representing healthcare workers. It would impose a one-time tax of 5%, mostly on their investments, which would raise about $100 billion.

It is necessary, argues the Service Employees International Union-United Health Workers of the West vital health services at risk by reducing federal subsidies and the state budget’s own deficits.

The proposal carries many philosophical, economic and political aspects.

Wealth taxation can be traced back to ancient Egypt. Since California already taxes real estate, why should other forms of personal wealth be exempt?

Also, California already taxes income on a sliding scale with the highest rates for the highest earners, so shouldn’t a wealth tax be imposed using the same rationale?

Most of the 200 or so Californians who will be taxed would probably answer no to those questions. A few have already escaped for states like Nevada, Texas, and Florida that don’t tax income.

In theory, those who have not yet migrated will still be subject to the wealth tax as it will be backdated from January 1, 2026. However, the tax is likely to face legal challenges and targeted taxpayers who have not yet moved will likely argue that the retroactive levies are illegal.

The sponsoring union may face opposition from unions representing other occupations because they would see little or no benefit. Getting it on the ballot can make an impact another measuresponsored by public employee unions, which would continue the surtax on high earners that was first passed in 2012 and later extended through 2030. It raises about $10 billion a year.

Meanwhile, Gov. Gavin Newsom is vociferously opposed, arguing that a wealth tax would drive rich people out of the state. The richest 1 percent of Californians pay nearly half of the state’s income taxes.

Newsom last week called the measure “poorly drafted”, arguing that its revenue would not be distributed among other groups.

“It does not support our public educators,” he said. “It doesn’t support our teachers and counselors, our librarians. It doesn’t support our first responders and firefighters. It doesn’t support the general fund and parks.”

Although Newsom has long opposed wealth tax proposals, his apparent presidential ambitions certainly played a role in his opposition campaign promises. Enacting a wealth tax could be used as a weapon in a presidential campaign.

Would California voters embrace a wealth tax on the ballot?

A survey commissioned by opponents and published Tuesday found the measure won a clear majority when a sample of voters were read its official wording, but rejected it when they heard a counterargument.

So who knows?

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.