A bill now making its way through the California Assembly would, should it passed and signed by Governor Newsom, create what backers are describing as a "first-in-the-nation net worth tax" on residents with more than $30 million in assets. The threshold for the .4 percent tax would only be $15 million for married couples who file their taxes separately.
"The California Wealth Tax would add critically needed revenue for California by creating a more equitable tax structure," said Assembly Member Rob Bonta. "Families are hurting right now. COVID-19 has only made matters worse. In times of crisis, all Californians must step up and contribute their fair share. Asking these well-resourced Californians to give a little more to keep our people working and support our most vulnerable is the right thing to do."
His proposed tax would also be applied to wealthy ex-Californians, even if they haven't called the state home for as many as ten years.
The goal for Bonta and his co-authors is to generate about $7.5 billion for the general fund by hitting as many as 70,000 California residents with the added tax, since California's coffers are running low right now due to the economic impact of COVID-19 pandemic.
Reportedly there's not enough time for the bill to get a final vote before the end of the legislature session on August 31st, but lawmakers will likely be asked to consider it again in the next session. This is a revision to a similar bill that received a lukewarm reception earlier this year.
The bill would also require the Franchise Tax Board to come up with ways to enforce the tax and collect the money, including regulations regarding the valuation of assets-- like a business-- that are not publicly traded. That's another reason it is unlikely to be passed in the little time that remains in the current session.
The California Wealth Tax is co-sponsored by the California Federation of Teachers, SEIU California, and the California Teachers Association. On the Thursday the CTA put out a written statement demanding the California legislature to vote on the Bonta bill in addition to another, AB 1253, which would tax households making more than $1 million annually. The CTA claims both bills are intended to address "growing inequality" in the state.
"California students, parents and educators are facing a school year like none we've seen before," wrote E. Toby Boyd, CTA's President. "Now, with budget deferrals and a reduction in Prop. 98 revenues, schools are facing a $20 billion shortfall. We need additional revenue now to reopen and keep our schools safely open. Our most vulnerable students and communities pay the highest price when schools don't have a stable, reliable funding source from year-to-year. The time is now for lawmakers to boldly adopt increased taxes on California’s wealthiest billionaires."
Assemblyman Miguel Santiago is another of the California Wealth Tax bill's authors. He believes some people are financially better off than they were before the pandemic, while others are on the verge of losing everything they have.
"We cannot just sit back and turn a blind eye," said Santiago. "We are at a very critical point in time where if we don't start putting dollars where our values are, we will see unprecedented devastation in our communities. We need people to start pulling their own weight here, and it starts with the ultra-rich."
The wealth tax would have an immediate start date if it becomes state law.