The article doesn’t mention the method how the State will determine the value of the investments. Most of peoples investments that are high net worth, are not publicly traded, they are usually their own companies that they have built over time.
Another issue is how it affects savings accounts. You traditionally expect to pay taxes on the interest. Now they want to tax the principal. Which means your retirement fund will be depleted much faster than you had planned. The politicians promise that it will only affect rich retirees, but many poor retirees are not confident that promise will be kept.
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This wealth tax would apply to current California residents, not former California residents.
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It would only apply to residents with a net worth of at least $30 million dollars ($15 million for married taxpayers filing separately). It wouldn’t apply to poor, average, or even the vast majority of wealthy retirees. (And it would take a 2/3 vote in each house of the legislature to change these parameters).
Look, I’m generally skeptical at best of wealth taxes in general, and I think that are reasonable objections to this one in particular, but could we keep to the actual facts of this proposal in this discussion?
Now, California Can Assess Taxes No Matter Where You Live…Really
If you leave, California is likely to probe how and when you stopped being a resident. For that reason, even if you think your facts are not controversial, be careful. California is known to chase people who leave, and to disagree about whether they really are non-residents.
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Even where California agrees that you moved, they might not agree when you moved.
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Most tax lawyers will tell you that they would much rather fight the IRS than California’s FTB [Franchise Tax Board] any day of the week. Savvy taxpayers know this too.
This is all correct.
To some extent. There are property taxes which are a tax on wealth more than income ( and the reason why many people I know had to move when they retired.) and some states also have personal property taxes, where you pay taxes on the value of certain types of property- typically vehicles for individuals, but businesses may pay this tax on furniture and equipment. And although most states do not currently tax intangible personal property ( stocks, bank deposits,licenses) it seems to have been much more common in the past. Florida taxed intangible personal property until 2007. Kansas still allows counties and cities to impose them. It seems that taxes on tangible and intangible personal property used to be more common than they are now - here’s an article from 1954 that starts out with
Recent trends in state taxation have demonstrated an increasing
tendency to exempt intangible personal property.’ Pennsylvania recently
has joined most of the industrial eastern states in ceasing to obtain revenue
from such a source; but, despite constant criticism,2 the Commonwealth
has retained it for county purposes.
But is this constitutional? Im sorry for asking but this seems like a guy bullshiting.
I’m definitely the wrong person to be asking if it’s constitutional. I will state that I believe it’s accurate based on the number of articles I’ve seen from reputable sources.
The one I linked previously was from Forbes and they’re about as neutral/factual of a source as you’re going to be able to find these days.
Is what constitutional? Taxing people based on wealth appears to be constitutional - the concept has been around long enough to be challenged.
It doesn’t retroactively apply to people who are no longer residents of California, so that’s not an issue.
The part of the bill where the author said that people who move out of California would still be taxed. That doesn’t sound constitutional to me. And how would they enforce it?
There is no such part of the bill.
The OP misunderstood part of the bill - it doesn’t tax former residents of California, it prorates the tax on a current resident of California who has been a resident for fewer than ten years. If a current resident has been resident for five of the last ten years, only half of the wealth is subject to the tax.
According to this article, the tax would apply to former residents for 10 years. This is the part that I am questioning as constitutional.
Huh. I’ve listened to the interview, and Assemblymember Bonta, who is apparently the author of the bill, does seem to pretty clearly state that the tax continues to apply to residents who move out of state up to 10 years after they move. I retract what I wrote above about that aspect of the bill. I was wrong.
This is a “messaging” bill with low chances of becoming law IMO.
IANATA but as I read it
(a) the general coverage is for people who are tax residents of California at the close of any given year. No problem there. Then in addition…
(b) there are provisions for adjustments for people who have been residents less than 10 years and provisions for people who were residents PART of the tax year, but those are standard in state taxation laws. What’s bothering people is that
(c ) there are also some taper-off provisions which seem to me to apply for people who would have been liable for the tax the prior 10 years but are no longer tax residents.
If I am understanding it correctly, if 10 years after it being in effect someone were to leave Cali after having resided there 10 years, they’d be expected for the following 9 years to be charged .9, .8… etc,of what would have been the tax, and if they had resided 5 years, they would expect that for the following years they’d be charged .5, .4,… etc until going to 0. Provided,
(d) Any wealth tax the new state of residence collects, is credited against this tax up to full payoff.
However, AFAICT this does not seem to be retroactive, so does this mean on the first year of the proposed law the “exit tax” would have to be 0 because nobody would have been liable before the law passed? Still I don’t see how the proponents expect this to actually work for the best, sounds like a “make me a counter offer” move.
And BTW we all know something can be unworkable, impractical, counterproductive, stupid or even evil and still be constitutional.
I’m wondering what aspect of the constitution this would run afoul of. State jurisdiction, maybe? But if North Carolina can require Washington-based Amazon to collect NC sales taxes, there’s already precedent for cross-state-line collection of state-based taxes.
I dunno. It may be unconstitutional. But I’m not clear what specific aspect of the constitution would forbid this sort of law or its enforcement.
States should not be able to tax the wealth of permanent residents of other states. How could such a law even be enforced? Amazon is collecting sales tax for items bought by NC residents. Could NC force Amazon to collect sales tax from former residents of NC? The idea is ludicrous and I doubt the courts would allow it to stand.
Okay, but can you point to the “no ludicrous ideas” clause in the constitution? I’m really wondering which specific constitutional clause you’re relying on when you say it’s unconstitutional.
I’m not a constitutional scholar but since it took a constitutional amendment to implement the income tax, I am guessing it would require yet another to allow individual states to directly tax non-residents. Also, were I wealthy and were I to move to say NC, just how would the Franchise Tax Board of California compel to to pay this wealth tax?
My question is the same as madsircool’s. Just how is California going to enforce this? If a rich Californian moves to Texas and refuses to comply with this law by paying the wealth tax, is California going to demand extradition? They can’t garnish his wages or anything. He might be subject to arrest if he ever sets foot in CA again, but he can avoid that simply by…well, never setting foot in CA again.