California politicians are reportedly proposing a new tax on the state’s wealthiest inhabitants, even if they have already relocated to another area of the country.
Assemblyman Alex Lee, a progressive Democrat, filed a measure in the California State Legislature this week that would levy an additional yearly 1.5% tax on anyone with a global net worth of more than $1 billion.
The measure would reportedly begin in January 2024.
As early as 2026, the bar for being taxed would be reduced: people with a worldwide net worth of more than $50 million would face an additional 1% yearly wealth tax, while billionaires would still face a 1.5% tax.
The bill is a modified version of a wealth tax authorized by the California Assembly in 2020 but rejected by the Democrat-led state Senate.
The most recent version, which was just submitted, has provisions that allow California to levy wealth taxes on citizens even after they have left the state and relocated elsewhere.
Worldwide wealth includes different possessions such as farm assets, arts and other collectibles, equities and hedge fund interest, and so on.
The measure also includes mechanisms to generate contractual claims related to the assets of a wealthy taxpayer who lacks the cash to pay their annual wealth tax obligation since the majority of their assets are difficult to convert into cash.
This claim would necessitate the individual submitting annual returns with California’s Franchise Tax Board and finally paying the outstanding wealth taxes, even if they had relocated to another state.
Advocates believe that the funds might be used to increase financing for schools, housing, and other social services, as well as contribute to California’s large $22.5 billion state deficit.
Critics of the bill however pointed out that it may actually cause the deficit to actually rise in the longterm as it will likely lead even more Californians to flee the state.