California Politicos Proposing New ‘Wealth Tax’ for Super-Rich, ‘Exit Tax’ for Those Who Leave
The state of the state is so dire…Governor Gavin Newsom is threatening to cut spending on climate change projects.
Some California politicos are proposing an additional “wealth tax” on the state’s richest residents.
And while many of you will laugh at my pain, the Democrats want this tax enacted nationally…so it concerns you, too.
Assemblyman Alex Lee, a progressive Democrat from San Jose, filed legislation that would tax an extra 1.5% on Californians with a worldwide net worth of more than $1 billion starting January of 2024, and 1% for those making more than $5o million starting in 2026.
Lee’s proposal aims to tax assets such as stocks and bonds that can skyrocket in value without incurring taxes until they’re sold. He said the tax would apply to the top .1% of California earners and could generate about $22 billion.
“For far too long, we’ve allowed income inequality to deepen and fester in this state and this country while the rich get richer and the middle class shrinks behind,” Lee said Monday.
The legislation is part of a multi-state effort from progressive lawmakers across the country who say the nation’s top earners need to pay their fair share.
The proposal includes an “exit tax,” dings former Californians even years after leaving the state and moving elsewhere.
Exit taxes aren’t new in California. But this bill also includes provisions to create contractual claims tied to the assets of a wealthy taxpayer who doesn’t have the cash to pay their annual wealth tax bill because most of their assets aren’t easily turned into cash. This claim would require the taxpayer to make annual filings with California’s Franchise Tax Board and eventually pay the wealth taxes owed, even if they’ve moved to another state.
California was one of several blue states last week to unveil bills to impose new wealth taxes. The other states were Connecticut, Hawaii, Illinois, Maryland, Minnesota, New York and Washington. Each state’s proposal contained a different tax approach, but they all centered around the same basic idea: the rich must pay more.
Clearly, the state’s Democratic Party leadership is trying to stop the fiscal bleeding. The exodus from California picked up the pace considerably in 2022.
A growing number of Americans migrated from predominantly blue states with steep taxes like California and New York to red states with lower taxes like Florida and Texas last year, according to a Bank of America analyst note that is based on findings from U.S. Census Bureau data and U-Haul rates.
Although the entire U.S. population as a whole grew by just 0.4% between July 2021 and July 2022, the data underscores major differences in population growth at the state level.
The South, which has states with some of the lowest individual income taxes in the country, was the fastest-growing region. Its population increased far faster than the national average, jumping by about 1.1% – or roughly 1.4 million people last year – a phenomenon described as the “Sun Belt migration.” The region also benefited from about 870,000 Americans who left other parts of the country for warmer climates and lower taxes.
In fact, the state of the state is so dire….Governor Gavin Newsom is threatening to cut spending on climate change projects.
California Gov. Gavin Newsom is proposing to cut billions of dollars in climate spending and delay funding of major programs to balance a $22.5 billion budget deficit if tax revenues don’t rebound.
The $297 billion budget blueprint Newsom unveiled on Tuesday was a stark departure from the fiscal boom times California enjoyed as recently as last year, when an unprecedented $100 billion surplus that Newsom himself called “absurd” underpinned a record $310 billion budget. California has $29.5 billion less revenue this year.
The obvious flaws in the proposal have been noted by many:
Going to be tough going if they are no longer residents and no longer own property in California. This is a quick way of having corporations AND their owners leaving.
— Charles Lemons (@TankCurator) January 24, 2023
You can’t tax people outside of your state unless you’re the federal government. They’re desperate and they’re reaching!
— Jordan Rider (@Rides2128) January 25, 2023
How are they going to enforce that… 🤔
— Your Less-Than-Average Joe (@JoeCort07) January 24, 2023
I must note a savvy music reference:
Hotel California… You can check out but you can never leave.
— AlpineLiving (@AlpineLiving2) January 24, 2023
Sadly, despite my plea, I think many of you agree with this sentiment:
California continues to get the government it deserves gooder and harder.
— balzacq (@balzacq5) January 5, 2023
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Comments
Next year they will introduce a tax for people failing to reside in California.
Other states should tax rich California residents too. Setup reciprocity, such that any state which demands taxes from another state is subject to taxes from other states.
I could see other states fighting this or perhaps offering those who recently moved there from California financial aid to help deal with this tax.
In such a situation, the bill for this financial aid should go to California. They should not be permited to profit from their shenanigans.
Uhh… no.
Like the CA plan, sounds rather unconstitutional. But so do reparations and they might try for that too.
Monty Python did that 50 years ago. “Taxing all foreigners who live abroad.” I sold property in Kalifornia about 20 years ago and a certain percentage was retained. We filed a tax report to get most of it refunded, and that which was kept got deducted from the oregon tax so our net loss was zero, it was Oregon who lost revenue to Kalifornia.
How did they manage to go from a $100 billion surplus one year to a $22.8 billion deficit the next. I’m sure the politicians found ways to spend, waste, or pocket every penny of the surplus, but how do these clowns keep getting elected? Or is it just to the point where they’ve screwed things up so badly that anyone who might be able to reign in the madness just throws up their hands in disgust and leaves the state.
How do they keep getting elected? Those who are in power in California count the ballots. Note I did not say “votes” because there is no confirmation that the ballots come from an actual, living, citizen resident where he/she/it/they cast ballots or that he/she/it/they only cast one ballot.
And of course the “Intolerable Acts” taxes are aimed at those who have left, or who are going to leave regardless of level of disgust.
Subotai Bahadur
California got billions from American taxpayers in Biden’s “American Rescue Plan” and assorted other federal handouts of American taxpayers’ money; it was a complete disgrace because California’s own policies created the need for the rest of America to bail them out. AGAIN. When the money ran out (the money from the federal gov’t, i.e. the rest of America’s taxpayers), California had to rely on its own tax policies which cannot come close to meeting the utter crazy of their spending policies. These include everything from green crap to crushing regulations to sponsoring crime and criminals.
You jest, but when you leave CA they lie and say you’re still a resident. That happened to Gilbert Hyatt an inventor that moved to NV from CA in 1991. CA lied and said he had situs until 1992 and conducted a punitive audit in 1993 and found he owed taxes.
Hyatt eventually lost his 28-year fight on Sovereign Immunity.
That’s why Elon Musk sold everything he owned in CA when he left. He had to make sure CA had no hold on him even though I’m pretty sure they tried the same stunt with him as they pulled with Hyatt.
We already have the administrative and financial infrastructure in place for that, it’s called the federal government and income tax. When things get bad enough in California we’ll all be told we must bail it out for the good of the country. They already rely on the rest of the country to provide for their energy shortfall, petroleum based and electricity. Their water supply management is terrible and selfish. Its surplus-shortage cycle has been known for years and infrastructure ignored.
Central Valley agriculture is being destroyed. Some of the best educational institutions in the world are threatened with becoming little more than day care centers for intellectually challenged spoiled brats. Crime, lawlessness, drug use, and homelessness are are supported. Illegal immigrants are shipped out of their sanctuary state to sanctuaries (New York, snort) because they have no room for them.
(Continued)
California is the textbook case of how a collection of greedy, short-sighted, selfish, ignorant, spoiled, corrupt politicians can and have mismanaged and squandered the heritage left to it by its ancestors. It is the canary in the country’s coal mine.
Puts a new slant on California or BUST! https://www.imdb.com/title/tt0299632/mediaviewer/rm1306611200/?ref_=tt_ov_i
Gads. Snub Pollard. Haven’t seen him in decades.
This is not the first time that California has tried to tax former residence.
Yes, they went after the pensions of retired workers who had moved out of state. It took a considerable fight, but CA eventually lost that battle. I cannot state how happy that we moved out of CA.
Good way to discourage people moving to your state, or owning property or other assets located there.
A good thing for CA that billionaires don’t have the resources to fight this or to move out of state,
That’s too bad for poor billionaires. California has out-maneuverd them. Now they find themselves stuck in a hopeless situation.
I am fairly sure there are some fold tab A over slot B methods to get around this.
Or use a heat source to activate the secret writing on the back.
I am constantly told, usually in a very condescending way, that California is the “fifth largest economy in the world” and everything there is totally hunky-dory. So why do they need to do this?
I have been on the job market a few times in my life, and I dismissed out of hand any position that was located in California. I’m not worth what they would have to pay me to live in that state. “Nice place to visit… “
“You’ve set foot within California, you now owe us full taxes for the rest of your life and that of your progeny in perpetuity” – California
You have had the same experience as me, but it involved more places than California. I had offers for jobs in New York, Baltimore, Ill annoy, and others where either the taxes were obscene, or the regulations had regulations.
I had an offer that would mean moving back to California. I counter-offered with a low-mid six figure salary requirement and they about choked.
They about choked by a Gentle Grizzly’s offer! If you want to see them to run, Growl.
I can understand why you you wouldn’t want to move back to California though. All gentle grizzlies left years ago and you’d be the only one there.
The only grizzly left is the one on the state flag.
I live in Commiefornia (parents live here and I was offered a good job).
But even making $95k a year I live in a smaller house with less disposable income than when I lived in Oklahoma making $65k a year.
Exactly. Been there all of 4 times, with the last being in 2009. Lovely place to visit, but NEVER want to live there.
Memo to progressives in California-American citizens have the right to move to any other state in the United States-and taxes of this nature which are clearly punitive in nature are of dubious constitutionality
Not dubious. Blatantly unconstitutional.
Since when do Leftists consider the Constitution to be a higher priority than their own wishes?
Subotai Bahadur
Democrats in God forsaken New Jersey did something similar some time ago. If you sell your house, and plan to escape the state, the state puts a freeze on the capital gains of the sale until the state gets its taste.
The New Jersey exit tax requires you to withhold either 8.97 percent of the profit/capital gain you make on the sale of your home or 2 percent of the total sale price: whichever is higher.
Later, when you file your New Jersey tax return, the actual capital gain tax you owe will be deducted from your estimated tax payment—with the remainder refunded to you.
(They apparently discovered that people leaving the state were not filing required NJ income tax returns on the sale.)
And they wonder why people and businesses are leaving. Nobody could be this stupid. Could they?
.
It sounds like something that could be used on a resume by a Democrat planning to run for president.
“The proposal includes an “exit tax,” dings former Californians even years after leaving the state and moving elsewhere.”
Mister Newsom… tear down this wall!
If a family owns a little grocery, or have a shop where repeat business is a high percentage of their income, it’s a it ha4d to just pull up stakes and re-locate. You would be starting all over again.
I see many comments but here and other sites criticizing those that remain. Family obligations (care for sick family or really REALLY deep roots) affect such choices.
I have no family of my own, and no real attachment to any community, so, I could move from Tennessee tomorrow with no real problems. Others have noi choice but to remain in that once-amazing state.
Chuck McDowell can soon branch off from getting you outta your time share to getting you Outta Dodge.
It’s probably misrepresented, and not entirely nonsense. The idea I gather is that stocks rise in value while you’re in the state and you don’t pay tax if you don’t sell, so the state wants to recapture the rise when you do sell even if you’re in another state, for their share of the rise.
If it works like income from two states, you get relief from your home state for taxes paid to another state (up to the rate of the home state). So your capital gains would be taxed less at home if California took part of it.
It makes tax forms insanely more difficult, though.
If it’s actually a wealth tax, that’s another matter and pure idiocy.
rhhardin,
You operate from the premise that the State is entitled to ‘their share’ of the increase in the value of a capital asset. Can they tax the transaction, a taxable event, when an asset is sold? Ok fine for real estate or a business in CA which have a clear nexus to CA. That’s ordinary.
What they are proposing is to tax intangible assets and even tangible but mobile assets like art whose sale occurs while the owner is a resident of another State. In addition they propose that the tax be applied to the asset totals of CA residents. IOW the total value of their assets hits the threshold and they must pay the tax. That aspect is a wealth tax.
The governor had a dream. In his dream he saw California as a prison and all the residents were prisoners. And naturally he was the warden.
Pretty soon he is gonna wake up.
John Carpenter did that movie already.
Hmm, seems those wanting freedom during Nazi Germany had to take extraordinary measures to remain free and leave. CaliExit is going to start looking like the end scene of The Sound of Music with people leaving in the middle of the night to escape the tyranny of the morons.
I’m thinking not so much Nazi Germany as Soviet East Berlin… a civil abomination as opposed to a wartime one.
Why not Nazi Germany? The Democrat Reich checks every box on the Nazi thing to do list—including racialist policies. Jews and others seeking to expatriate suffered egregious, confiscatory exit taxes.
New York has/had a similar policy. They fought Rush for years claiming that he was still liable for NY taxes long after he moved to Florida.
And they lost
As well they should have. It still cost him a small fortune to fight it.
Ruch could buy good lawyers.
Now that I think of it I seem to remember that it had something to do with the syndication of his radio show, amount of time he spent in NY and where the Syndication was out of. Maybe. They were still foolish to try and push it against someone that could send lawyers as much as needed to fight it. We sure couldn’t do that.
If they are going to tax the appreciation on capital gains occurring while a citizen lives in the state, even if the citizen leaves the state before selling the asset, then they need also exempt from taxation the appreciation on capital gains occurring on an asset before someone moves into the state, as well.
And of course, they also would have to provide a credit for capital losses occurring while a citizen lives in the state. But somehow that provision won’t make it into the law…
That’s not how Democrat looters work.
If a person moves out of state mid-year then Cali can tax the income derived from the money earned while a resident but only for that partial year. As for taxing earned income, capital gains on stocks, real estate etc not sold, thats a non starter.
I wonder why those idiots dont think Billionaires can hire very good lawyers.
Nice thing about Super-Rich is your lawyers are agile enough to work around anything.
More will leave. Less will come, except for the illegals that will further burden the welfare system. Perhaps the black population will increase if the reparations bill passes.
(3) (A) For a taxpayer who was subject to the Wealth Tax in one of the preceding four years and is no longer a resident, and does not have the reasonable expectation to return to the state, the calculation of the numerator under paragraph (1) shall be as follows:
(i) For the first year the taxpayer is not a resident, the numerator shall be a fraction between zero and one, based on the percentage of days in the year the taxpayer was present in the state, plus the years of residence over the three previous taxable years.
(ii) For each subsequent year, the numerator shall be reduced by one until the numerator reaches zero.
A wealth and transnexus tax.
Years ago, CA tried this crap after discovering that many residents retired to NV. CA claimed that the retiree’s pension was earned in CA, despite the person no longer being a CA resident. NV immediately passed a law forbidding NV courts from enforcing a CA tax judgement, and that ended the BS.
If the numerator starts as a fraction between 0 and 1, and then is reduced by 1 in subsequent years, the numerator will only reach 0 if it starts at exactly 1.
Once the numerator reaches a negative number, will the state owe the former resident from then on?
Let’s not forget the fact that “exit taxes” are hunky dory with the federal government, when it comes to American nationals going expat and renouncing their citizenship.
New York is also deservedly infamous for it’s extending taxes to out of state.
We have more concrete examples and exasperated individuals as more people move away to escape stuff like this from them.
Just to be safe from California declaring that you have a nexus of interests that make you a Californian for tax purposes, Americans need to a) move themselves and their personal property out of the state ASAP, b) divest themselves of any real and non-portable property in California moving the proceeds to America, c) never set foot in California again for business or recreational purposes, d) never buy goods or services from companies based in California or that are produced in California, and e) if you sell goods either do not sell them in California or enact a Leftist California surcharge to retaliate for their attempt to oppress Californians. Incidentally, ideally I would include entertainment and sports in d). Y’all can decide for yourself how much, if any, (sarc) you want to attribute to the above.
Subotai Bahadur
I am befuddled by the number of “freedom-oriented” national societies that schedule conventions and other events in California. Institute for Justice just announced their 2023 “Partner’s Club Retreat” at Dana Point. LI itself scheduled an “IRL” get-together in California a couple years ago. Every time I get an invitation to attend one of these things, I have to decline, reminding the organizer that as a conservative American who exercises his God-granted constitutional rights on a daily basis, venturing into California would immediately make me a felon.
I do, however, greatly enjoy pissing off the timeshare promoters by reminding them in this manner that their lack of acumen in choosing their political representatives will continue to have actual negative consequences for their wallets.
If they want to go that route every other state should set up an “entrance tax” to residents leaving California! Though I don’t think that would hold up from a Constitutional perspective.
Isn’t this how the Soviet Union worked? They made emigrating Jews pay a large exit tax?
Just another example of California now being the People’s Socialist Republic of CA.
Not that I follow the sports leagues anymore as they have all gone Communist, but how many free agents are going to avoid CA teams going forward?
What’s next from these filthy tyrants? Internal passports? Oh wait! I believe WA is already experimenting with a system where they track people’s movements and only “allow” them so many auto trips beyond a certain distance from their homes. An exit tax would seem to abridge freedom of Americans to travel. How is that not unconstitutional? Heck, why not just fence the border like real Commie regimes? (I’ll bet we won’t hear “fences don’t work” then.) If people claim to be vacationing outside CA, will a family member have to stay behind as “insurance” that they return? So much tyranny, so little time.
The Soviet Union required papers to move from one of its republics to another. Americans can cross state lines. It is essentially a privilege and immunity under the constitution. They can also change their legal residence. A penalty tax for doing so is of dubious constitutional validity.
On a practical level, these “exit taxes” could cause a veritable war between states as other states retaliate. There could be impact on interstate commerce. When such a law is the offing, the wealthy residents should pull out fast taking all connection with them. Revenues for the state might then go down. And why would anyone with wealth want to migrate into a state that won’t let her leave without penalty? If enacted, hard to think of a way that will drive affluent taxpayers to leave the state.
I thought the ‘privileges and immunities” clause of the U.S. Constitution had long been interpreted to prohibit states from limiting the movement of citizens from one state to another. (Paul v. Virginia, 75 U.S. 168). That has been interpreted to include taxation against moving from one state to another, hasn’t it?
The Cali-Lords have figured out that redistributing the richie’s money can buy more votes directly than they’ll get from campaign donations. And more reliable, too.
Here all those rich-caste Californians thought property rights were a thing; and that money was theirs. Also learning that you’re on the inside, “one of us” until something more expedient comes along. Sad. or Hilarious. I can’t decide.