On March 22, Assembly Members Alex Lee, Wendy Carrillo, Lorena Gonzalez, Miguel Santiago, Ash Kalra, Luz Rivas, and Mark Stone introduced Assembly Constitutional Amendment 8 to propose a wealth tax to be placed before the voters.
Officially, ACA 8 is a resolution to propose to the people of the State of California an amendment to the Constitution of the State, by amending Section 2 of, and adding Section 37 to, Article XIII thereof, and by amending Section 1 of Article XIII B.
ACA 8 would authorize the Legislature to impose a tax upon all forms of personal property or wealth, whether tangible or intangible, and would require any tax imposed to be administered and collected by the Franchise Tax Board and the Office of the Attorney General as provided in statute. ACA 8 would authorize the Legislature to classify any form of personal property or wealth for differential taxation or for exemption by a majority vote.
In addition, ACA 8 would require the Legislature to establish a task force on wealth tax administration. The task force would determine an adequate level of annual funding and staffing for the administration of a wealth tax imposed by the Legislature. The measure would establish two continuously appropriated funds in the State Treasury to cover, for the first two years of collection, the expenses of administration and collection of the wealth tax.
Finally, ACA 8 would remove the limitation on appropriations of the State and of local governments until such time as specified conditions are satisfied. As a constitutional amendment, ACA 8 would require a 2/3 vote of both houses of the Legislature, and no action by the Governor, in order to be placed on the statewide ballot.
ACA 8 has six “whereas” clauses that are similar to findings and declarations. As such, it declares that the State has long-term needs in education, health care, and infrastructure that are not being met by existing revenues. Wealth inequality among California residents has increased dramatically. California’s current tax system results in the very wealthiest Californians typically pay less because the existing income tax fails to adequately tax the investment income or wealth accumulations. Therefore, a tax on extreme wealth will restore fairness to the state’s tax system.
ACA 8 would amend Article XIII, Section 2 to provide that [new language in italics and removed language in strikeout]: “notwithstanding any other provision of this Constitution, the Legislature may provide for property taxation of all forms of tangible personal property, the taxation of all forms of personal property or wealth, whether tangible or intangible. Personal property or wealth that may be so taxed include, but are not limited to, shares of capital stock, evidences of indebtedness, and any legal or equitable interest therein not exempt under any other provision of this article. therein. The Legislature, two-thirds of the membership of each house concurring, Legislature may classify such personal property or wealth for differential taxation or for exemption. The tax on any interest in notes, debentures, shares of capital stock, bonds, solvent credits, deeds of trust, or mortgages shall not exceed four-tenths of one percent of full value, and the tax per dollar of full value shall not be higher on personal property than on real property in the same taxing jurisdiction.”
In addition, ACA 8 would add a new subdivision to Section 2 to provide that: “Any tax on personal property or wealth imposed under the authority of this section on or after the effective date of the measure adding this subdivision shall be administered and collected by the Franchise Tax Board and the office of the Attorney General as provided in statute.”
ACA 8 would also add Article XIII, Section 37 to provide a task force on wealth tax administration that would be established by the Legislature. This task force would be charged with determining an adequate level of annual funding and staffing for the administration and collection of a wealth tax. An adequate level of annual funding and staffing should additionally enable the Franchise Tax Board to hire and pay reasonable fees to any outside experts or outside counsel as appropriate and to help fully administer and collect the Wealth Tax.
The measure would establish in the State Treasury the Franchise Tax Board Wealth Tax Administration Fund. For each of the first two years for which the Wealth Tax is collected, $50 million or 1 percent of all projected revenues from the Wealth Tax, whichever is greater, would be deposited into the Franchise Tax Board Wealth Tax Administration Fund. During this time period, $25 million or ½ of 1% of all projected revenues from the Wealth Tax, whichever is greater, would be deposited into the California Department of Justice Wealth Tax Administration Fund.
ACA 8 would additionally amend Article XIII B, Section 1 to provide that the State’s appropriations limit, as well as for each local government, would be designated to not apply for any year, unless at least two out of three conditions have been satisfied. These possible conditions include spending per student, fraction of population without health insurance, and percentage of household whose housing costs are in excess of 50% of the household’s income.
The co-authors of the proposed Wealth Tax have described it as a 1% surcharge for amounts above $50 million, and 1.5% for amounts above $1 billion. They also claim there are 169 billionaires in California and so very few taxpayers will be impacted by the measure. They also estimate that the proposed Wealth Tax would generate over $22 billion annually, presumably based on a static economic model.
- Gov. Newsom Signs Sen. Wiener’s Housing Density Legislation - September 16, 2021
- Pondering Some Changes to California’s Recall Process - September 16, 2021
- Bills Reaching Governor Gavin Newsom’s Desk - September 11, 2021