California is notorious for its high rate of taxation, but their newest proposal might be the craziest idea yet. Under California Assembly Bill 259, by Assemblyman Alex Lee (D-San Jose) the state would be able to tax resident’s “worldwide net worth”.
According to the text of the bill:
Existing law imposes taxes upon income and real property, as well as taxes upon certain transactions and excise taxes.This bill would, for taxable years beginning on or after January 1, 2024, and before January 1, 2026, impose an annual tax at a rate of 1.5% of a resident of this state’s worldwide net worth in excess of $1,000,000,000, or in excess of $500,000,000 in the case of a married taxpayer filing separately. The bill would, for taxable years beginning on or after January 1, 2026, impose an annual tax at a rate of 1% of a resident’s worldwide net worth in excess of $50,000,000, or in excess of $25,000,000 in the case of a married taxpayer filing separately. The bill would also impose, for taxable years beginning on or after January 1, 2026, an additional tax at a rate of 0.5% of a resident’s worldwide net worth in excess of $1,000,000,000, or in excess of $500,000,000 in the case of a married taxpayer filing separately.
Starting in 2026, the bill lowers the threshold to where the tax will be imposed on net worth of just $50 million. It’s not just the billionaires California is going after. Moreover, the bill brings up the question of how the state will track, value, and properly tax assets around the globe.
Zero Hedge reports:
Note it’s a “worldwide” tax. So property in other states or countries would be taxed. That would be a headache right there. How does one assess value in another country, with different systems of valuation, even different languages? Maybe you could do it in Singapore, which has an advanced economy where many people speak English. But how about investing in cobalt mines in the Congo, subject to price fluctuations, local upheavals, and the interference of Communist Chinese mining interests?
What’s also crazy about this bill is that it would consider the sale of any asset “at any time within the past 10 years” to be taxable activity that has to be reported to the Franchise Tax Board. This entails that even residents who have packed up and left the state of California within the past decade are still going to be taxed.
According to Lee who introduced the bill,“With this modest tax on the ultra-wealthy who pay a lower effective tax rate than the bottom 99 percent, we would have sustained investments in our schools, tackle homelessness, maintain and expand needed services, and much more.”
Modest is one way to put it. However, if the vast majority of millionaires and billionaires who reside in the California flee because of the disincentives from taxation, this will create serious issues as the tax base dwindles. California already has the highest state income tax rate in the country of 13.3 percent. This, alongside the perpetual tax increases the state is introducing, is driving up the already sky-high cost of living.
The last person to leave California, please turn off the lights.
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