California lawmakers are pushing legislation that would impose a new tax on the state's wealthiest residents — even if they've already moved to another part of the country.
Assemblyman Alex Lee, a progressive Democrat, last week introduced a bill in the California State Legislature that would impose an extra annual 1.5% tax on those with a "worldwide net worth" above $1 billion, starting as early as January 2024.
As early as 2026, the threshold for being taxed would drop: those with a worldwide net worth exceeding $50 million would be hit with a 1% annual tax on wealth, while billionaires would still be taxed 1.5%.
Worldwide wealth extends beyond annual income to include diverse holdings such as farm assets, arts and other collectibles, and stocks and hedge fund interest.
The legislation is a modified version of a wealth tax approved in the California Assembly in 2020, which the Democrat-led state Senate declined to pass.
The current version just introduced includes measures to allow California to impose wealth taxes on residents even years after they left the state and moved elsewhere.
Exit taxes aren't new in California. But this bill also includes provisions to create contractual claims tied to the assets of a wealthy taxpayer who doesn't have the cash to pay their annual wealth tax bill because most of their assets aren't easily turned into cash. This claim would require the taxpayer to make annual filings with California's Franchise Tax Board and eventually pay the wealth taxes owed, even if they've moved to another state.
California was one of several blue states last week to unveil bills to impose new wealth taxes. The other states were Connecticut, Hawaii, Illinois, Maryland, Minnesota, New York and Washington. Each state's proposal contained a different tax approach, but they all centered around the same basic idea: the rich must pay more.