Wealth Tax California Style: Tax ‘Avoidance’ Will Not Be Allowed

Tesla founder Elon Musk recently left California for Texas after warning Gov. Gavin Newsom of his intensions, to which Newsom responded: Meh.

Many other business owners before and after Musk have also fled the state’s high taxes and business-interfering regulations, and received much the same response. Former Gov. Jerry Brown use to insist that California’s beautiful weather was enough to attract and keep people and businesses, despite his policies having the opposite effect.

Between 2001 and 2011, California lost 33% of its manufacturing base, and 613,000 jobs, according to a study by the Milken Institute, which addressed the state’s staggering regulations and high taxes.

MSN reported from 2001, when China joined the World Trade Organization, to 2018, the Golden State lost 654,100 jobs to the Asian nation.

562,500 jobs were lost in California, 3.34% of the state’s total employment of 16.8 million jobs in 2017, the Los Angeles Times reported.

These numbers are staggeringly high, even for a state of nearly 40 million residents, because manufacturing jobs pay well and come with really good benefits.

California Globe reported in September that the Hoover Institution’s Lee Ohanian  warned about this. “California businesses are leaving the state in droves. In just 2018 and 2019—economic boom years—765 commercial facilities left California. This exodus doesn’t count Charles Schwab’s announcement to leave San Francisco next year. Nor does it include the 13,000 estimated businesses to have left between 2009 and 2016, Ohanian said. “The reason? Economics, plain and simple. California is too expensive, and its taxes and regulations are too high.”

Bottom line: California is bleeding jobs and has been for two decades, as Democrat lawmakers only continue to pass laws and policies which exacerbate this: job-killing business regulations, and high corporate and personal tax increases. And the continue pushing more and more funding to special interest groups and labor unions.

There is a huge almost child-like disconnect between Democrat lawmakers and economics. Regardless of their destructive economic policies, they believe higher taxes and a federal bailout will fix everything.

On the table again in California is a wealth tax, AB 2088, and one which will follow any and all businesses that leave California for greener economic pastures.

The bill’s author, Assemblyman Rob Bonta (D-Contra Costa), blames coronavirus for creating “inequality” in California, and not previous Democrat legislation and policies, the Globe reported in August. “Families are hurting right now. COVID-19 has only made matters worse,” Bonta said. “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.”

This first-in-the-nation net worth tax is estimated to generate $7.5 billion per year in new “revenues” to the state coffers.

California has the highest tax rates in the nation. Bonta and Democrats want to force successful Californians to pay additional taxes on wealth and income that’s already been taxed.

Bonta said tax “avoidance” would not be allowed as California would tax them for the next ten years, despite what state they live in. Bonta said that because they accrued the wealth in California, the state can continue to legally tax it.

“Tax avoidance,” with the primary purpose of reducing the valuation of a taxpayer’s worldwide net worth is required to be disregarded. “The bill authorizes the Franchise Tax Board to adopt regulations necessary to carry out these new statutory provisions including the valuation of certain assets that are not publicly traded,” Globe contributor Chris Micheli reported.

“AB 2088 requires the Franchise Tax Board to adopt regulation designed to prevent the avoidance or evasion of the wealth tax.”

The Wall Street Journal weighed in on just how punitive AB 2088:

Assembly Bill 2088 proposes calculating the wealth tax based on current world-wide net worth each Dec. 31. For part-year and temporary residents, the tax would be proportionate based on their number of days in California. The annual tax would be on current net worth and therefore would include wealth earned, inherited or obtained through gifts or estates long before and long after leaving the state.

The proposed wealth tax would fall on a star high-school or college athlete who grows up in California but becomes a wealthy professional in another state after graduation. It would grab a scientist who develops a drug to cure cancer years after leaving California. A grandchild who spent a single summer surfing in Southern California would be subject to the tax. It would include anyone returning home to a foreign country after 60 days in California.

California already has a self-imposed financial crisis on its hands with unfunded public employee pensions totaling more than $1 trillion.

AB 2088 is predictably sponsored by the California Federation of Teachers, SEIU California, and the California Teachers Association, which stand to benefit greatly from a wealth tax.