SACRAMENTO, CA – Assemblymember Alex Lee (D-San Jose), Assemblymember Lorena Gonzalez (D-San Diego), Assemblymember Ash Kalra (San Jose), Assemblymember Miguel Santiago (D-Los Angeles), Assemblymember Luz Rivas (D-Arleta), Assemblymember Wendy Carrillo (D-Los Angeles), and Assemblymember Mark Stone (D-Monterey Bay) introduced a tax package (Assembly Constitutional Amendment 8 and AB 310) on extreme wealth in California. Similar to the Ultra-Millionaire Tax Act recently proposed by Senator Elizabeth Warren, this tax would apply to households with net worths of more than $50 million — the top 0.07% of Californians.
A David Binder poll conducted in January 2021 indicates that Californians overwhelmingly support a wealth tax — 67% of California residents polled supported a wealth tax on Californians worth $30 million or more. If the proposal is approved by the legislature, voters will decide in 2022.
California is one of the most economically unequal states in the country and the COVID crisis has further exacerbated inequality. The proposed wealth tax is 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. This means that only the top 0.07% of the richest families or about 15,000 households would be affected by the tax, while raising estimated revenues of about $22.3 billion per year.
“While we have a one-time budget windfall for the year, that’s not going to last,” said Lee (D-San Jose). “In order for California to come back ‘roaring’ and build back better, we need sizable reinvestments in our communities for those who are not paying their fair share in taxes — it’s time for a tax on extreme wealth.”
Income and wealth is more concentrated in California than in the US overall, and this concentration and inequality has been growing. One in four billionaires in the US lives in California and the collective wealth of California billionaires has surged from $300 billion a decade ago to $706 billion in March 2019, and to $960 billion in January 2021. From March 2019 to January 2021, the collective wealth of California billionaires grew about the size of the State’s budget. Since the start of the pandemic, US billionaires have accumulated an additional $1.1 trillion in wealth.
The tax on extreme wealth would increase tax revenue by $22.3 billion annually, improve tax justice, and help reduce wealth concentration. 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, which is a major weakness of the California tax system. The wealth tax would remedy this injustice by taxing all wealth, whether this wealth has been realized as income or not.
“At a time when too many Californians are working two or three jobs to feed their families and struggling to make ends meet during this pandemic, the richest in our state are doing better than ever before,” Assemblywoman Lorena Gonzalez (D-San Diego) said. “To reduce the outrageous level of income inequality that exists in America today and rebuild the disappearing middle class, we need to support working families with a new tax on extreme wealth.”
“While working families grapple with this crippling pandemic, the rich continue getting richer,” said Assemblymember Ash Kalra (D-San Jose). “California needs a plan to reform an unjust system that calls on the masses to pay their fair share of taxes while punishing our most marginalized communities struggling to survive. Unless we have the wealthy pay their fair share, we only continue to perpetuate the pervasive nature of economic inequity that has solely benefitted those at the top.”
“We cannot go back to ‘normal’, that’s not good enough for millions of Californians,” said Santiago (D-Los Angeles). “We need to build back even better than normal. That’s why we need a wealth tax. Think of what a wealth tax can do for our schools, tackling homelessness, rent assistance, healthcare for all Californians and student debt. I am excited to join these leaders in support.”
“The ultra-rich have taken advantage and profited from working class Californians. They are 40% richer since the start of the pandemic, increasing their wealth by more than $1.3 trillion. As our state is headed into an economic recession, our most vulnerable communities will continue to be disproportionately impacted. It is time the top earning millionaires and billionaires pay their fair share in taxes to keep our government services funded for the very people they profit from,” said Assemblywoman Luz Rivas (D-Arleta).
The proposed plan will be a constitutional amendment because the California Constitution currently limits the tax rate to 0.4%. Therefore, it is not possible to go beyond 0.4% without amending the Constitution.