By Edward Ring
If at first you don’t succeed, try again. This adage applies well to ideas for new ways to tax Californians. Every election cycle we see new ways to be taxed, and higher tax rates, but rarely will we see a tax get repealed.
So it is that Assemblyman Alex Lee (D, San Jose) has introduced Assembly Bill 259, the Wealth Tax Act, which will impose an annual “worldwide net worth” tax of 1 percent on net worth above $50 million, rising to 1.5 percent on net worth over $1.0 billion.
Everything about this bill is goofy. It’s unconstitutional, it applies to intangible assets like goodwill or trademarks, it applies as well to assets that have subjective, wildly fluctuating values, such as fine art, and it even applies to equity owned in private companies that the holder may never convert into real money.
Already weighing in at nearly 16,000 words, AB 259 is riven with loopholes. And this typifies governance in California today — a state awash in laws and regulations so capricious and so complicated that they only reward those willing to laboriously scheme their way through the bureaucratic maze and opportunistically search for cracks in the walls, while penalizing those who aren’t sufficiently devious and instead prefer to do productive work. California is losing those good people.
A wealth tax will accelerate an exodus already in progress, as the wealthy will flee to more hospitable states, joining California’s small businesspeople, its vanishing middle class, aspiring youth, skilled workers, honest tradesmen and contractors, fixed-income retirees, and everyone else who can no longer afford to live here.
There’s a reason nobody can afford to live in California, and laying even more taxes onto the rich won’t fix it. But that isn’t the point, if you’re Alex Lee. Because taxes fund the state government, and the state government pays state employees, and labor unions collect dues from state employees. In the November 2022 election, apart from contributions from the State Democratic Party, every one of Lee’s top twenty contributors were unions, starting with the California Teachers Association.
Alex Lee and his union-controlled allies in the state legislature aren’t operating alone. As Lee proudly proclaimed in a press release issued January 23, AB 259 was issued “in coordinated effort with seven additional states,” Connecticut, Hawaii, Nevada, New York, Maryland, Illinois, and Washington. These bills vary, but all of them tax wealth.
There’s something else these bills share. As reported in the Los Angeles Times last month, “In the absence of a federal wealth tax, the State Innovation Exchange, a progressive nonprofit, and the State Revenue Alliance, which works with labor groups to call for taxing rich people, gathered a handful of states to create policy as part of the ‘Fund Our Future’ campaign.”
With what labor groups, you might ask? The State Innovation Exchange Board of Directors includes Mary Kusler, National Education Association, Michelle Ringuette, American Federation Of Teachers (AFT), and Brian Weeks, American Federation Of State, County, And Municipal Employees (AFSCME). The Advisory Committee for the State Revenue Alliance includes Amie Baca-Oehlert, Colorado Education Association, Marc Stier, who has worked as a campaign manager for the SEIU, and Charles Khan, the “Organizing Director at the Strong Economy For All Coalition, a Coalition of Labor Unions and Community groups.”
The other people overseeing and staffing the State Innovation Exchange and the State Revenue Alliance have backgrounds that typify big government and social justice activism — their resumes include copious references to familiar labor slogans — Defund The Police, Fight for $15, “campaigns for social, racial, and economic justice,” “racial equity,” “gender equity,” etc. As for the umbrella group “Fund Our Future,” it was founded by the American Federation of Teachers in 2019.
Behind this drive to impose a wealth tax is not merely a presumptuous resentment, i.e., the mission of the State Revenue Alliance is that “corporations and the ultra rich pay what they owe.” There is also a profound ignorance informing this movement. The “ultra rich” typically buy assets using after-tax income. Then if they collect dividends or rents off those assets, they pay taxes again. If they ever sell their assets, they pay taxes on whatever gains they realize. There is already property tax on real estate, and we can thank the Biden administration and the 117th U.S. Congress for a new luxury tax on expensive planes, boats, and automobiles.
Based on current law, it might appear that America’s wealthy, especially those living in California, already “owe” plenty.
What unions in general, and public sector unions in particular, fail to understand is that in their drive for higher taxes on the rich and higher wages for their members, they are raising the cost-of-living for the rest of us.
The unions’ relentless push for more regulations and higher taxes make doing business more expensive, which translates into higher prices for goods and services. As such, union-backed taxes are regressive, and achieve the exact opposite of what unions purport to care about: they hurt working families.
Unions and their political front groups will never stop pushing these bad policies, however, because it runs contrary to their own financial interests.
Edward Ring is a senior fellow with the California Policy Center, which he co-founded in 2013. Ring is the author of Fixing California: Abundance, Pragmatism, Optimism (2021) and The Abundance Choice: Our Fight for More Water in California (2022).