CA is considering a 10 year wealth tax on anyone rich, including anyone who leaves the state or stays in CA for two months. Don’t take a long vacation, or go to med/grad school there, or work there or CA has decided they’re entitled to a cut of all your future earnings/wealth.
It hasn’t passed yet, and may not pass legal muster, but if not a 16% bracket may be in the cards. Even if the initial wealth threshold is high, CA’s pension promises and fiscal responsibility aren’t going in the right direction so I’m sure they’ll come calling for the rich and the moderately rich after the Evil Rich fail to produce enough revenue for their dreams. Elon Musk isn’t the only one who sees the writing on the wall.
California, for a great many years, has been taxing former residents who made their money back when they were California residents. In particular California seeks to tax pension income.
A good friend of mine, now deceased, made his money playing piano in SoCal. Fortunately for him he had a Canadian girlfriend. He finally escaped California’s mighty tax claw when the two of them quite literally moved to Canada!
It’s illegal to tax qualified pension income when you move out of state, which is why many Californians have chosen to move to Nevada, Texas, or Washington once they retire. I know one person who plans to use the gap between retirement and collecting Social Security to convert their 457 in Texas. Eventually they figure they may move back to be near their family, but for at least five years they can save themselves 9.3% state income tax even if they have to convert to Roth at a 24% or 32% federal tax bracket.
As far as the “wealth tax” AB 2088 it died last session without even a legislative analysis, which leads me to believe this is not a serious proposal. The leftist legislators are using this to virtue signal but I don’t see any members of leadership signing on. Bill Text - AB-2088 Wealth tax.
Obviously “fiscal conservatism” is long dead at this point. It’s interesting how any sort of attempt to balance incoming taxes to spending seems to have switched parties, I think that happened long before the fringe crazies came into play replacing the constitutional conservatives, fiscal conservatism died before that happened.
I’m curious is it characterized as a leftist proposal because it’s not a regressive tax, because it’s in California, or just because the people proposing it are Democrat?
Edit:
I don’t pay attention to CA but would also doubt they’d actually pass and implement this. Nationally though, the pandemic has resulted in a starkly K-shaped “recovery”/redistribution of wealth. There seems to be valid arguments to consider having the upper 0.1% pay for some of the effects since they’ve benefited disproportionately while the rest have lost during this year.
I characterize them as leftist because the legislators proposing this are very progressive. Assemblywoman Gonzalez from San Diego is an ex union boss. So is Senator Durazo. Senator Skinner is the senator from Berkeley. Assemblywoman Wicks also represents Berkeley. Assemblyman Bonta represents Oakland. Assemblyman Chiu represents San Francisco. I don’t see a single member of leadership signing on to this bill. No wonder it died in committee.
This is exactly right. The republican tax cut caused the deficit to skyrocket. There has been no hint of fiscal conservatism in the last four years.
When I wrote my republican senator to oppose that tax cut in favor of a balanced budget (isn’t it the GOP that always insisted that any new spending be budget-neutral?), he said it was a “hail mary” to stimulate the economy, somehow ignoring both that the economy was growing and that he had opposed the same type of stimulus during the great recession when it was actually needed.
FWIW, I consider myself independent. But I almost always vote for democrats because the hypocrisy of the republican party is not only intolerable, but actively detrimental to our country.
I’m a little confused by the discussion above, since states can’t print money and have to balance the budget by definition. CA was even building an emergency slush fund for a few years while tax revenue exceeded expenses.
This is well established tax law.
"Since 1996, federal law prohibits states from imposing income tax on any “retirement income” of plan participants who no longer reside in the state, even if the participants earned the benefits while they were residents of that state and income taxes were deferred on the contributions. “Retirement income” for this purpose includes income from qualified plans and certain payments from nonqualified plans. Payments from a nonqualified plan are considered “retirement income” only if (i)
the plan is a restoration plan (i.e. a plan that restores benefits that cannot be provided under the company’s qualified plans due to Internal Revenue Code qualified plan limits), or (ii) the payments are made for the life expectancy of the recipient or a period of at least ten years. ")
Most public and private pensions, as well as cash balance plans popular among the White Coast Investor crowd qualify. The real issue is for executives and athletes who take their payments over a time frame longer than when they are executing or playing.
So this advance is based on 2019 income, but the actual 2020 tax credit will be calculated using 2020 income, right? So it’s possible for this advance to be “clawed back” / reduced at tax-time? The first stimulus payment was also a tax credit, but IIRC it wasn’t conditioned on 2020 income, only on 2019, so it wouldn’t be clawed back…
The provision also provides for Treasury to issue advance payments based on the information on 2019 tax
returns. Eligible taxpayers treated as providing returns through the nonfiler portal in the first round of
Economic Impact Payments, provided under the CARES Act, will also receive payments. Treasury may issue
advance payments for Social Security Old-Age, Survivors, and Disability Insurance beneficiaries, Supplemental
Security Income recipients, Railroad Retirement Board beneficiaries, and Veterans Administration beneficiaries
who did not file 2019 returns based on information provided by the Social Security Administration, the Railroad
Retirement Board, and the Veterans Administration.
In general, taxpayers without an eligible social security number are not eligible for the payment. However,
married taxpayers filing jointly where one spouse has a Social Security Number and one spouse does not are
eligible for a payment of $600, in addition to $600 per child with a Social Security Number.
The provision aligns the eligibility criteria for the new round of Economic Impact Payments and the credit for
the Economic Impact Payments provided by the CARES Act. Taxpayers receiving an advance payment that
exceeds the amount of their eligible credit will not be required to repay any amount of the payment. If the
amount of the credit determined on the taxpayer’s 2020 tax return exceeds the amount of the advance payment,
taxpayers will receive the difference as a refundable tax credit.
What is your math on a 30-50% increase in taxes? That kind of number didn’t jump out at me from the article. (the numbers definitely get worse for very high earners with capital gains income – but the impact of potentially losing the step-up basis is tough to characterize for what “most people” should “expect”, though again, will have a large impact on generational transfer among the wealthy – or a possible resurgence of whole life insurance as an inheritance vehicle)
