Progressive lawmakers push for tax on California billionaires’ overall net worth

A group of progressive California lawmakers is pushing a new wealth tax on the state’s richest 0.1% in a new move coordinated between several other blue states.

The measure would impose a 1% tax on the total global assets – not just the income – of residents worth more than $50 million. People worth $1 billion or more would pay a 1.5% tax on their total net worth.

California’s progressive tax system already relies heavily on the state’s highest earners. In 2021, the state’s top 1% paid nearly half of overall income taxes, according to the Department of Finance.

Assembly member Alex Lee (D-San Jose) cited reports by ProPublica that the ultra-wealthy often employ tactics to lower their overall tax bills and said his proposal would force them to “truly pay their fair share.”

“For the working class, tax avoidance is a felony. For the mega-rich, tax avoidance is an industry that they employ many people to be very clever about,” he said.

The tax would apply to tangible and intangible assets including stocks, cash and deposits, interest in private equity and partnerships, real property, art and other collectibles.

The additional tax revenue would pay for infrastructure, education, housing and other projects.

A companion constitutional amendment would also allow state lawmakers to change the state appropriations limit, or Gann Limit, which voters approved in 1979 to cap state spending.

Lee said it would ensure lawmakers are not “hamstrung” by budget rules.  

The San Jose Democrat unsuccessfully pushed a wealth tax last year. This time, he’s hoping a coordinated effort between seven other states, where similar measures have been introduced, will move the needle.

The multi-state effort includes Hawaii, Washington, New York, Connecticut, Maryland, Minnesota and Illinois. It would also serve to deter the wealthy from moving to other states to avoid the taxes, Lee said. “If the name of the game is to run, they cannot hide.”

He also pointed out the proposed wealth tax would generate roughly $22 billion in revenue – nearly enough to fill a state budget deficit projected this year.

Taxpayer and business groups quickly came out against the measure, citing the heavy burden the state already places on high earners.

“Further relying on this volatile and highly mobile tax base would only increase the boom-bust cycles that define our budget,” said California Business Roundtable president Rob Lapsley.

California Taxpayer Association spokesperson David Kline said the wealth tax – along with paperwork evaluating their total net worth every year – would push more people to follow billionaire Elon Musk out of California. He also said it would expose people to fines or legal trouble if their estimate is off.

“It creates a whole new incentive for people to say, ‘we have no problem paying our fair share of taxes in California, but this is getting ridiculous,’” and moving to a different state, he said.

Proponents of the measure dismissed those arguments, pointing out that while Musk’s move to Texas garnered headlines, the number of millionaires and billionaires in California continues to increase.

“They are not leaving the state,” said Assembly member Corey Jackson (D-Riverside). “People are transitioning all over the country, but millionaires and billionaires are not leaving the state.”

As a tax measure, the bill would require approval from two-thirds of lawmakers. The constitutional amendment would also go to voters for final approval.