California s Wealth Tax Arrives – WSJ

Democrats introduced the bill last winter, and it will get a hearing Wednesday in the state Assembly as lawmakers scrounge for revenue to fill a projected $68 billion budget hole. Gov. Gavin Newsom on Wednesday will also unveil his budget for the coming year. Democratic legislators are proposing a wealth tax as an alternative to spending restraint.

The bill would impose an annual excise tax of 1.5% on the worldwide net worth of every full- and part-year California resident that exceeds $1 billion, starting this tax year. Come Jan. 1, 2026, the state would tax wealth that exceeds $50 million at a rate of 1% each year, with an additional 0.5% tax on assets valued at more than $1 billion.

Part-time residents would be taxed on a pro rata share of their wealth based on the number of days they spend annually in California. The tax would also apply to nonresidents who have recently left the state. You can check out of the state, but you would still have to pay California s wealth tax if you do.

The wealth tax would apply to nearly all assets, including shares in a partnership, private-equity interests, artwork and financial assets held offshore. California s Franchise Tax Board would value assets that aren t publicly traded. That means private businesses located outside the state could be examined by the board s auditors and appraisers.

It s worth noting that Democrats exempted real property from the tax as a favor to their high-end real-estate industry and Hollywood donors. This carve-out would encourage the wealthy to shift more of their investments into real estate. Perhaps Democrats are trying to ameliorate the damage from local mansion taxes in San Francisco and Los Angeles on real-estate sales.

via www.wsj.com

The camel’s nose is poking your wallet.