Narch 17, 2021
Several states are unveiling new tax proposals—adding to a wave of interest in taxing ultra-rich Americans and corporations being led by the Biden Administration and Senate Democrats, reports YahooFinance.
Lawmakers in California are considering a tax on extreme wealth that would impose an annual excise tax of 1% on those who have wealth exceeding $50 million per taxpayer and a 1.5% tax on those with wealth above $1 billion. The tax would raise an estimated $22.3 billion starting in 2023.
“This is the way that we get back to a California where everybody has an opportunity, and I don’t know a single business leader or moderate who doesn’t believe in that,” Assembly Member Lorena Gonzalez (D-San Diego) said during a press conference on Tuesday, March 16. “It’s time to do something about it and quit bitching, quite honestly.”
On a national level, the Biden Administration and Democratic lawmakers are floating several different tax measures related to higher taxes for wealthy Americans and corporations. Senator Elizabeth Warren (D-Massachusetts) recently reintroduced her proposal on taxing the ultra-rich.
“I know Senator Warren has put forward a wealth tax, and the president shares her view that middle-class families are paying more than their fair share and those at the top are not doing their part,” White House Press Secretary Jen Psaki said at a press conference on Monday, March 15. “Certainly he has that shared objective.”
The proposed wealth taxes in California and Washington State are similar to Warren’s plan and would impose an annual tax rate on income above certain thresholds.
“Since the start of the pandemic, billionaires have accumulated an additional $1.1 trillion in wealth,” Assembly Member Alex Lee (D-San Jose) said. “In order for California to really come back roaring, we need sizable investments in our communities… we’re proposing a modest 1% tax on households with net worths of over $15 million, and 1.5% on wealth over $1 billion.”
Critics of the wealth tax say it may be difficult to calculate and be enforced. The revenue generated might not be as much as expected while the costs of administering the tax could be higher than calculated.
“Taxing wealth is something we’ve never done in the United States and that most countries have not done,” Jared Walczak, the Tax Foundation’s vice president of state projects, told Yahoo Money. “They’re complex and they create a lot of economic harm because they’re paid on your assets — which often have to be liquidated to pay them.”
While wealth taxes reached their peak in OECD countries in the 1990s, the number of OECD countries that currently have a wealth tax dropped to five from 12 by 2019 because of the challenges those taxes create.
The proposed plan in New York—which includes raising income taxes, imposing new capital gains taxes, and increasing the estate tax among other measures — is similar to President Joe Biden’s campaign plan to raise the corporate tax rate to 28%, require a true minimum tax of 21% on all foreign earnings on U.S. companies, raise the top individual income tax rate to 39.6% (the current maximum is 37%), and require those who make more than $1 million annually pay the same rate on investment income as they do on their wages.
Research contact: @YahooFinance