We are once again being reminded why the once prosperous state of California is falling into a budgetary black hole and bleeding residents at an increasing rate. (Though to be fair, some of those losses are being made up for by an army of illegal migrants who use up even more resources.) The Democrats who run the state can’t seem to help themselves, and they keep going back to the well with failed ideas to increase state revenue. The latest chapter in this ongoing story comes to us from Stephen Green at PJ Media. It appears that members of the Golden State legislature are once again hyping the idea of a “wealth tax” because there are simply too many gosh darned billionaires hanging around the state and nobody is supposed to have that much money.
Because California is one of those places where bad ideas go to achieve immortality, a wealth tax is being placed back on the table in the state assembly.
You know, it seems like only yesterday [It was only yesterday, Steve —editor.] I reported that progressive groupthink had doomed California to a slow-motion suicide starting 30 years ago. But instead of reversing course, one representative is adding another few drops of arsenic to the state’s coffee supply.
“Last year alone, billionaire growth grew by $250 billion dollars. That’s the entire size of the state budget,” Assemblyman Alex Lee (D-San Jose) told KCRA 3 News this week, referring to a study by the left-leaning California Budget and Policy Center.
Fortunately for the productive and successful in California, even though there is supposedly a hearing scheduled to discuss the idea, it lacks support even among Alex Lee’s own party. One of Gavin Newsom’s staffers took to Twitter and declared that a wealth tax is not on the table.
— Brandon Richards 🐻 (@BrandonRichards) January 9, 2024
As Vodkapundit reminds us, even if some insane form of a wealth tax was passed into law, it couldn’t come close to healing the state’s budgetary ills. Tax returns from residents earning more than one million dollars per year account for less than one-half of one percent of all of the state’s residents. Also, even under Lee’s plan, they still wouldn’t be able to take all of the money out of those people’s accounts, as much as they would like to.
Instead, they would be vacuuming up a portion of the billionaires’ “unrealized gains.” That’s a major problem when such a tax is inevitably challenged in court. You can calculate how much money someone received from outside sources and the state can, unfortunately, scoop up a percentage of that. But this scheme applies to money that’s already been earned and taxed, now residing in investment accounts and other assets. If the market value of those assets rises during a given tax year but the assets are not sold off, the investor hasn’t actually taken in any new wealth. If the state taxes that perceived income but the value of the asset drops next year, would the state offer a refund? That seems unlikely.
Even if we ignore all of those problematic issues, a wealth tax would almost certainly produce another unintended and undesirable result. People are already fleeing California in large numbers. If the state starts fleecing the wealthiest and most productive residents, you can rest assured that many of them will be hitting the bricks as well. We’ve already seen it happening in New York City and the phenomenon is hitting the Big Apple’s budget hard. The same can happen to Hollywood and Silicon Valley. And then who will be left to pay the state’s massively high taxes? Perhaps they can try taxing the illegal migrants. Good luck with that.