California Democrats introduced a bill that would tax the state’s residents who have a “worldwide net worth” above $1 billion, even those who have left the state.
The bill, introduced in the state legislature on Jan. 19, would set a 1.5% annual extra tax on those with a net worth above $1 billion, or $500 million for married residents filing separately, as early as January 2024. Those with a net worth exceeding $50 million would receive an extra 1% tax in as early as 2026.
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The worldwide net worth of a resident would not include their personal out-of-state property, real property, or diverse holdings, such as farm assets, arts and collectibles, and hedge fund or private equity interests. However, the tax would include properties, both in and out of state, that are held indirectly, such as corporations, trusts, and partnerships, among others.
The tax will be determined using a mathematical equation based on the number of years that residents have lived in California over the last four years. That number will be the numerator of a fraction, divided by four. Residents who have lived in California for two years, for example, will have a fraction of two divided by four.
For previous California residents living their first year out of state, the numerator of their fraction will be between zero and one, based upon the percentage of days that the taxpayer was in the state for that first year plus the three previous taxable years living in the state.
For each year after that they do not live in California, the taxpayer’s numerator will decrease to zero. This will apply for all taxpayers that would have been subject to the “wealth tax” had they still resided in California.
Assemblyman Alex Lee, who introduced the legislation, said in a post on Twitter the bill will alleviate stress off the shoulders of the working class.
“The working class has shouldered the tax burden for too long. In CA, we’ve introduced #ACA3 + #AB259 to tax the ultra rich & invest in all Californians,” Lee said. “The ultra rich are paying little to nothing by hoarding their wealth through assets. Time to end that.”
The working class has shouldered the tax burden for too long. In CA, we’ve introduced #ACA3 + #AB259 to tax the ultra rich & invest in all Californians
The ultra rich are paying little to nothing by hoarding their wealth through assets. Time to end that https://t.co/DadERQTgiK
— Alex Lee 李天明 (@alex_lee) January 20, 2023
The wealth tax bill in California is one of eight that are being introduced across the United States. Connecticut, Hawaii, Illinois, Maryland, Minnesota, New York, and Washington state all introduced their own version of the wealth tax last week, as well.
California introduced a similar bill last year in the California Assembly, but it did not make it through the state Senate, according to the Washington Post. Only five of the 80 state Assembly members supported last year’s bill.
The new tax bill will affect 0.1% of Californian residents, Lee has said, and will provide the state more than $21.6 billion in state revenue, something the state sorely needs because it is approaching a projected budget deficit of $22.5 billion.
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California’s taxes are already known for being among the highest in the country, despite giving residents a break when it deals with inheritance and real estate taxes. A 1% “millionaire’s tax” is already in place for incomes of $1 million. In 2021, the state’s sales tax was the highest in the nation at 7.25%.
The Washington Examiner reached out to Lee’s office for comment on the bill.
