Assemblymember Alex Lee wants to tax the ultra-rich. To that end, he’s brought forward AB 259, which proposes applying a 1% annual tax rate on Californians whose net worth is greater than $50 million and a 1.5% rate on those worth more than $1 billion (the state currently houses 186 billionaires). Accompanying AB 259 is a constitutional amendment (ACA 3), since the state constitution in its existing form caps personal property taxes at 0.4%.
Today, January 10, AB 259 is being put before the Assembly Revenue and Taxation Committee.
If passed, AB 259 could spur $20 billion in new annual revenue. Half of that would come from California’s billionaires, and overall the tax would only touch 0.1% of the state’s richest households.
Said Lee in a statement, “California has more billionaires than any other state. Ultra-wealthy millionaires and billionaires generate their wealth from California’s robust and diverse economy, while many Californians live paycheck to paycheck. The ultra-rich are able to take advantage of tax-avoidance strategies that ordinary people have no access to, with the wealth they accumulate in stocks and property skyrocketing untaxed. Meanwhile, working Californians shoulder the burden to pay for our roads, schools, infrastructure, and so much more.”
Lee’s office noted that the ultra-wealthy generally are not subject to income tax since they don’t have to work to make a living. Instead, because they live off their wealth, they can bypass income taxes. Even CEOs like Mark Zuckerberg and Larry Ellison, despite going into work, famously take $1 salaries and avoid dealing with income tax. “The ultra-wealthy accumulate vast amounts of wealth through assets like stocks, bonds, real property, and other investments. Capital gains taxes can be avoided by borrowing against these assets without selling,” Lee’s staff explained in an email.
This phenomenon is not limited to California; it is observed nationwide.
Lee continued, “California is confronted with pressing challenges on many fronts, including the severe housing crisis, rising levels of food insecurity, and one of the largest income inequality gaps in the U.S. As we tackle a major budget deficit, the state has to find ways to sustain investments for all Californians, especially our most vulnerable populations.”
Update: Assemblymember Lee’s office released a statement stating that the bill did not receive sufficient votes and was held by committee.
