In a concerted effort with seven other states, yesterday CFT President Jeff Freitas and Assemblymember Alex Lee (D-San José) reintroduced a tax on extreme wealth in California as AB 259 and an accompanying proposed constitutional amendment, ACA 3.
The tax, which is sponsored by CFT and includes nine co-authors in addition to Lee, would apply to households with net worths of more than $50 million, or the top 0.1% of Californians, and would generate an estimated $21.6 billion annually — roughly the same amount as the projected budget shortfall from the Governor’s proposed budget this year.
“CFT is proud to support AB 259 and ACA 3,” said CFT President Jeff Freitas. “Billionaires and mega-millionaires should pay what they owe in taxes. Working families shouldn’t have to subsidize the ultra-rich so that our communities can have the schools, roads, and essential services they deserve.”
A ProPublica analysis released in 2021 revealed that the richest 25 Americans pay just a tiny fraction of their wealth in taxes, and some are able to pay little to nothing in income tax, with effective tax rates lower than the average American. By increasing their fortunes in assets such as stocks and property and then borrowing off those assets, they are able to avoid selling the assets and paying capital gains taxes.
Similarly, while the California income tax is successful at taxing most Californians, it is not very effective at taxing the ultra-wealthy. For example, the richest Californians like Mark Zuckerberg, Sergey Brin, or Larry Page, can avoid the California income tax as long as they do not sell their stocks.
“With this modest tax on the ultra-wealthy who pay a lower effective tax rate than the bottom 99%, we would have sustained investments in our schools, tackle homelessness, maintain and expand needed services, and much more,” said Assemblymember Alex Lee.
A recent poll by TargetSmart Research Solutions found that 76% of California voters support implementing an income tax on billionaires, with more than half of voters (56 percent) strongly in support.
The proposed wealth tax is paired with a constitutional amendment and will apply a 1% tax on extreme wealth of $50 million or more per household and 1.5% on wealth in excess of one billion dollars. The proposed plan will be a constitutional amendment because the California Constitution currently limits the tax rate on personal property to 0.4%.
The number of billionaires on Forbes’ 35th annual list of the world’s wealthiest has increased dramatically, with the number of billionaires increasing by over 30% last year, or a new billionaire roughly every 17 hours. Their collective wealth has increased by $5 trillion since last year, and the U.S. has the most number of billionaires, with over a quarter of U.S. billionaires coming from California.
The billionaire tax would begin for taxable years 2024 and beyond and the ultra-millionaire tax would begin in January 2026.
