We pretty much all agree that the government needs some funding to operate essential functions. We have agreed on fees for services, property taxes and income taxes. We may not agree on the amount of tax, but we generally accept that taxes can be levied. That does not seem good enough for those interested in an ever-expanding government. Thus, they are searching for new means and they are looking to the final frontier – tax the assets people have accumulated over their lifetime – a wealth tax.
As we all know, the federal expenditures have expanded astronomically in recent years. In 2010 the expenditures were $3.55 trillion. President Biden’s proposed budget beginning October 2023 is $6.9 trillion.
Here are some fun facts at the state level. In 2023, California is spending twice as much per resident (in today’s dollars) as the government did in 2010. Florida and New York currently have very similar population levels, yet New York state spends twice as much as the Florida state government.
The issue recently erupted as eight states joined in a pact to establish a wealth tax. The eight states – New York, California, Washington, Connecticut, Hawaii, Illinois, Maryland and Minnesota – offer varying plans, but the idea of the pact is to stop people from shifting their assets out of one state to another. Seven of these states are already in the top eleven for tax burden – the exception being Washington. Four of the states are among the top for losing population.
In California, 27-year-old Assembly member Alex Lee is behind the plan. His proposal starts by applying to people with $50 million or more of net worth. It would be a tax of 1% annually. That would be $500,000 of their minimum net worth. If you have over $1 billion in net worth, your tax would be 1.5% annually. He states it would apply to just 23,000 households, but that is just the beginning. UC Berkeley professor Emmanuel Saez calculated the tax would raise $21.6 billion per year. Of course, that would never happen, driving the culprits to lower the minimum net worth levels of $25 million, $10 million, etc.
In Illinois, a state bleeding job creators, the proposal is to tax unrealized capital gains at 4.95%. This would encourage people to unload their appreciated assets prior to enforcement and put their money in bonds.
No one defines what happens to the taxpayer who does not have enough liquidity to pay the tax. They would be forced into a fire sale of some assets to meet the tax obligation, driving down their net worth and distorting the investment markets.
For those who hold illiquid assets, they would be forced to acquire appraisals annually at their own expense. Then they would be forced to sell a building or painting to pay their taxes.
In California, there are many steps to getting approval for this new tax. They would include a two-thirds vote of both legislative chambers. Then they must have a constitutional amendment by a two-thirds vote and, somewhere along the line, Gallivanting Gavin must sign on. It would then go to the voters for a simple majority vote. All that is achievable in California where the legislature and the population are in lockstep with taxing people “behind the tree and not me.”
If you are a productive member of society, I am sure you are probably wondering who is behind this-newfangled scheme to steal your assets. You might have guessed it is public employees particularly in the name of teachers’ unions. They announced drives across the eight states to press the matter, working hand in hand with their handpicked, union-funded legislators.
The fascinating aspect of this pact is it does not account for the fact that people are already fleeing these states for Texas, Florida, Tennessee, Idaho and on and on. Twenty-seven states are weighing tax reductions with many either lowering their income tax or eliminating it altogether. There is some delusional facet of this pact that believes the residents of those eight states will only relocate to one of the other member states.
California has a remedy for that. Part of their plan is to go after people fleeing the state to get the taxes even though they no longer live in California or one of the states in the pact. How they will achieve that will be fascinating to watch if this gets passed.
It is no wonder these governments are searching for new revenue sources. At the federal level President Biden jumped in with a new tax on unrealized capital gains. The assumption is that Biden’s team who actually run the government while Joe is doing whatever he does believes this will pass through the U.S. Supreme Court by not being considered an illegal wealth tax. Another classic example of how government wonks will go to the ends of the earth spending your money and attempting to take more of your money away from you.
None of these states (or Biden’s government) ever consider that maybe they have a spending problem – not a revenue problem. The aphrodisiac of taking money from people and spending it for them because “we know better” is too appealing to Leftists. Uncle Bernie and Lizzie Warren were pitching wealth taxes during their 2020 presidential campaigns. Warren released a plan that is the template for California’s Mr. Lee. The fact that many people are fleeing these states (with their wealth and employees) does not even begin to awaken these Leftists to the idea of changing course.
This is the clear definition that we have a civil war going on in this country and it is being fought over our money without guns.
