Assemblyman Rob Bonta (D-Oakland) made an appearance on “Cavuto: Coast to Coast” Friday to discuss his Wealth Tax proposal. Bonta told Cavuto the tax “affects about 0.15% of the California population — not the top 10%, not the top 1%, the top .15%, about 30,000 people.”
California Globe reported Bonta held a Zoom press conference Thursday announcing his legislation to tax the state’s wealthiest job creators and innovators – he claimed the “30,400 billionaires” living and working in California. (According to CNBC, there are only 630 billionaires in the entire United States.)
Bonta’s press conference was moderated by SEIU California, and not by his Capitol staff.
“The California Wealth Tax (AB 2088 as amended) would apply a 0.4% tax on the portion of a taxpayer’s net worth that exceeds $30 million. (approximately 30,400 people),” Bonta’s website says.
Bonta blames coronavirus for creating “inequality” in California, and not previous legislation and policies. “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.
In the new bill is an introduction statement that the wealth tax is “for the benefit of accumulating excessive wealth in this state,” Globe contributor Chris Micheli reported.
Knowing about the huge outbound migration from California, Cavuto asked what would happen to wealthy people who move out of state. 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,” Micheli said.
“AB 3088 requires the FTB to adopt regulation designed to prevent the avoidance or evasion of the wealth tax.”
Conversely, a billionaire who moves to California but acquired their wealth in another state, will still have to pay the proposed wealth tax for ten years.
“In California, we’ve had taxes on millionaires in the past. We raised taxes in 2012 by 3% — and the number of millionaires and billionaires in California has grown,” Bonta said. “We have 25% of the nation’s billionaires, 17% of the millionaires, those numbers are up and we’ve grown to be the fifth-largest economy in the world. So, while worthy of consideration it has not panned out.”
“Worldwide net worth under this bill would be calculated in the manner set for calculation of the federal estate tax pursuant to Chapter 11 of Subtitle B of the Internal Revenue Code (IRC) in effect on June 15, 2020,” Micheli said. “The estate tax begins at Section 2011 of the IRC. Worldwide net worth is deemed to be the value of all worldwide property owned by the taxpayer on December 31 of each year.”
“In addition, any transaction with a 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 (FTB) to adopt regulations necessary to carry out these new statutory provisions including the valuation of certain assets that are not publicly traded.”
Why would any wealthy individual move to California? Bonta said people will always move into the state because, “It’s California.”
Former California Gov. Jerry Brown used to say wealthy people stay in California and even move to the state for the beautiful weather, despite the high cost of living and high taxes.
Over the weekend, Politico reported that Gov. Gavin Newsom appeared tepid on the tax: “I want to see where things go over the next couple of months,” Newsom said, including “what happens if this passes, what happens if this doesn’t pass?” Then he cautioned that a wealth tax, championed on the national level by the First Partner’s preferred presidential candidate, is a “national construct” that on the state level could affect “your ability to retain and attract talent, individuals, companies, and your competitiveness.”
AB 2088 is co-sponsored by the California Federation of Teachers, SEIU California, and the California Teachers Association.