Oakland Assemblyman Rob Bonta held a press conference Thursday announcing his legislation to tax the state’s wealthiest job creators and innovators – the 30,400 billionaires living and working in California. This first-in-the-nation net worth tax is estimated to generate $7.5 billion per year in new “revenues” to the state coffers.
However, the state already taxes the income that built that billionaire wealth. And California has the highest rates in the nation. Why should successful Californians pay additional taxes on wealth and income that’s already been taxed?
Bonta’s justification for another wealth income tax on top of the highest tax rates in the nation is a “crisis in inequity” he says was created by the coronavirus. “During this pandemic, California has taken a massive economic hit that threatens to devastate our schools, social services and virtually every sector of our economy,” Bonta said. “Families are suffering as millions of Californians have lost jobs, suffered pay cuts, or endured reduced work hours.”
But the coronavirus did not create “inequities” or the struggling families. California families have long-suffered under high taxes, business-killing regulations, high cost of living, unaffordable housing and high rents, and encroaching state and local government.
Bonta’s wealth tax proposal is also not a new proposal in California. In March 2019, Sen. Scott Wiener (D-San Francisco) announced he was authoring legislation to put a wealth estate tax on the California ballot in 2020 in order to create a new tax for wealthy Californians, California Globe reported. “Wiener claims this new wealth tax is needed to equalize President Donald Trump’s tax reform to what existed before the federal tax break was created. However, Wiener also says ‘SB 378 directs all collected estate taxes to a newly created special fund: the Children’s Wealth and Opportunity Building Fund.’” Wiener said his bill “directs estate tax proceeds toward programs and services that directly address and alleviate socio-economic inequality and build assets among people who have historically lacked them, including helping low income children build wealth through savings accounts.”
“The California Wealth Tax would impose a tax on an extremely limited number of individuals (30,400 billionaires) who hold the highest levels of wealth,” Bonta said. “These are individuals who have successfully participated in California’s economy and gained tremendous wealth as a result. Requiring these well-resourced Californians to make a small additional contribution to keep our people working and prospering is the right thing to do.”
“We cannot let this moment pass,” Bonta said, calling his bill “a progressive approach.”
The Assemblyman said the revenue from the new wealth tax would be an “investment in schools,” go to to healthcare, unemployment claims, job creation and childcare. Except the new tax revenue would go directly in to the state’s General Fund; the bill’s language does not designate or mandate specific programs or areas of need where the money must be designated, making this just another “tax the wealthy” proposal.
California Globe attended Bonta’s press conference via Zoom video. Upon responding to the email conference request, we received a confirmation and were provided an email in which media could send in questions for prior approval. But that email was not to Assemblyman Bonta’s Capitol staff – the email address was to Lindsay Hopkins with the SEIU:
“Please submit any questions to: email@example.com.”
California Globe sent in a question which was never provided to Assemblyman Bonta: “Why will the revenue generated from a wealth tax go to the general fund instead of designating it to the programs and areas of need discussed in the press conference?” we asked.
No answer. However several other questions were read by Hopkins for Assemblyman Bonta, and others were emailed to him, including hard-hitting questions like “Will this tax hurt start-ups?”
Bonta had several other Assembly members speak to the importance and necessity of the bill.
“Before the pandemic, Californians were hanging on by a thread,” said Assemblyman David Chiu (D-San Francisco). “That thread has been cut.”
“People are losing jobs and healthcare, while we are seeing wealthy individuals getting richer,” Chiu said. “And billionaires are getting richer. It’s time we finally address inequities. It’s time we focus on average Californians over the wealthy; it’s time we make our system fair.”
COVID-19 did not cause job loss, business closures and the loss of healthcare — the statewide lockdown order was issued by Gov. Gavin Newsom.
“California has been very good to some – it’s time they pay their fair share,” Assemblyman Miguel Santiago (D-Los Angeles) said. “We need the revenue.”
Assemblyman Ash Kalra (D-San Jose), who represents Silicon Valley, said “Silicon Valley is the Capitol of inequality.” He added, “The social contract is broken; billionaires need to fulfill that social contract.”
Also on the call was Jeff Freitas with the California Federation of Teachers labor union. Freitas said the state must invest more in education. “Billionaires increased during COVID,” Freitas said. “In March through June, California billionaires made $175 billion. This (tax) is a drop in the bucket compared to what wealth was created.”
“Those billionaires need to reinvest in our state,” he added.
“We need investments, not cuts,” Bonta said.”We need to put concrete ideas on the table; revenue enhancements are part of it.”
U.C. Berkeley economist Emmanuel Saez weighed in on the wealth tax proposal, saying “the rich are piling up wealth because of limited spending.” He also blamed the economic crisis and budget deficit “due to COVID,” and said the tax was necessary because federal bailout funding “is unlikely.”
The once-Golden State of opportunity and innovation already ranks 48th out of 50 states in the Tax Foundation’s 2020 State Business Tax Climate Index. California ranked 49th on individual income taxes; 45th in sales taxes; 25th in corporate taxes, 16th in property taxes; 22nd in Unemployment insurance taxes. This is notable because the “wealthy” are often small business owners, and nearly all billionaires are tied to business.
Right behind California are New York at 49th and New Jersey at 50th. the only thing keeping California at 48th is our property tax rate, mandated at 1-2% increases annually, thanks to Proposition 13, passed in 1978 by voters. But this too is in jeopardy as Proposition 15 will be on the November ballot seeking to split commercial properties out of Prop. 13 protections, reassess them and immediately tax them at high new rates.