SACRAMENTO, Calif. (KRON) — A group of California lawmakers is making another push for a tax on the state’s “extreme wealth,” a move they say could bring in billions in state revenue.
Assemblymember Alex Lee (D-San Jose) has reintroduced the tax on extreme wealth in California, a tax that would apply to roughly 15,000 households.
The proposal would apply a 1% tax on those with a net worth of at least $50 million and a 1.5% tax on those worth more than $1 billion.
According to an analysis by professors at UC Berkley and UC Davis, the tax is projected to generate more than $22 billion a year in state revenue.
The bill, which would go into effect next year for billionaires and in 2025 for eligible millionaires, would go to the voters for approval in 2022 if it passes the Legislature.
Lee’s proposal would tax all wealth, whether it’s been “realized as income or not,” he said.
Lee points to reports of some of the world’s richest people avoiding income taxes as the reasoning behind the legislation.
However, some critics fear it will send some of the state’s wealthiest individuals out of the state.
Last year, Tesla’s Elon Musk moved the company’s headquarters from Palo Alto to Texas, where taxes are significantly lower.
“While some say California is driving away higher-income residents, the opposite is true – we’ve actually been losing lower and middle-income residents that are being priced out while continuing to gain higher-income residents,” said Assemblymember Alex Lee.
“With a tax on the ultra-wealthy who pay a lower effective tax rate than the bottom 99%, we can invest in our schools, tackle homelessness, expand needed services, and much more.”
It’s no secret that California suffers from a severe wealth gap.
The state is home to the largest share of the country’s billionaires and also the highest poverty rate, where 15.4% of California residents live in poverty.
But despite this, California has benefited from its current tax structure, which is disproportionately dependent on the state’s wealthiest individuals.
During the pandemic, California’s tax collections continued to soar — businesses reported a record-high $216.8 billion taxable sales, a 38.8% increase from 2020.
Supporters of AB 2289, including the California Federation of Teachers, want to see more done to help the state’s regular working families.
“California billionaires have increased their wealth astronomically since the beginning of the pandemic, while regular working families have struggled to pay their bills,” said California Federation of Teachers (CFT) President Jeffrey Freitas.
“We are proud to sponsor AB 2289 because it will provide the ability to fix our water, wildfire, education, and housing problems. It’s time we took care of each other, and not just watch billionaires fly into space.”
The tax will face an uphill battle.
Last year, a similar attempt by Lee failed to make it to the legislative committee hearings.
The bill is co-authored by Assemblymembers Wendy Carrillo (D-Los Angeles), Ash Kalra (D-San José), Luz Rivas (D-San Fernando Valley), and Mark Stone (D-Monterey Bay).