Thu, Jan 19, 2023 1:30 PM
By Ria Roebuck Joseph, Center Square contributor, The Center Square
Facing a partisan divide in Washington, state legislators met Thursday to discuss "tax justice" legislation as a means to secure more funding for social programs, infrastructure, universal healthcare and education. The group consisting of Democratic California Assemblyman Alex Lee, New York Senator Gustavo Riviera, Illinois State Representative Will Guzzard and Washington State Senator Noel Frame were joined by U.S Representative Pramila Jayapal and UC Berkeley Professor of Economics Emmanuel Saez.
Jessie Ulibarri of SIX Action, hosted the meeting. SIX Action, the social welfare division of the State Innovation Exchange is coordinating the campaign push for a wealth tax. The State Revenue Alliance, represented at the meeting by Charles Khan, is coordinating the strategic resources to power the campaign.
Altogether seven states: California, Connecticut, Illinois, Hawaii, Maryland, New York and Washington are coordinating efforts to simultaneously introduce legislation that would target unrealized capital gains, capital gains and estates of the wealthy. Four of the states, California, Washington, New York and Illinois are specifically targeting billionaires for wealth taxes.
Prof. Saez says this is a good idea. “Millionaires and especially billionaires, have been doing spectacularly well. This is particularly true in New York, California, and Washington that are billionaire heavy and they actually account for 40% of US billionaire wealth,” he said.
“Our current tax system both at the federal and state levels failed to tax the enormous wealth amassed by billionaires. Billionaires can keep profits inside their businesses, if they don’t sell, they can avoid the individual income tax, if they retire in Florida and sell then, they will never pay income taxes in the state where they made their fortune. So the billionaires, as a result of that, end up paying a lower tax rate than the rest of us. The proposed taxes on the wealth of billionaires or on the unrealized gains of billionaires are the exact policies we need to target that wealth directly. They will make a significant difference in the tax difference, in their burden and help restore tax justice.”
Others disagree. “Under California’s tax structure, 70% of the state's personal income tax revenue comes from the top 5% of earners. If these taxpayers were to leave for any of the 49 states with lower taxes, the wealth tax would jeopardize California’s largest revenue stream," said California Taxpayers Association President Robert Gutierrez.
But Jayapal is undeterred. She would like to see a wealth tax enacted nationwide. “At the end of the day a fair tax system where the wealthiest pay their fair share, where we recognize the need to tax not just income but wealth that accumulates generation after generation and disproportionately burdens black, brown and indigenous and poor people, it creates an unlevel playing field. We are showing a different way forward, where no matter who you are, or where you were born you have opportunity,” she said.
In California, the wealth tax is aimed at the top .1 percent of earners precisely because they’ve created so much wealth. That top echelon represents 23,000 million dollar households and 160 billionaires.
“In California the wealth tax would be predicted to generate nearly $22 billion. That's about the exact shortfall in this year’s budgeting well so it will plug almost the entire hole. It would essentially wipe out the shortfall and provide sustained investment for schools, infrastructure and needed services,” assemblyman Lee stated.
Lee is supporting a proposal that would raise taxes by one percent on households with a net worth of $50 million or more and one and a half percent for those with $1 billion or more in assets.
The assemblyman brushed aside any fears that such taxation would cause an exodus of the rich from California. “It's not the wealthiest that are leaving the state but the middle-and low income residents who can't afford to live here,” he noted.
A bill in Illinois is seeking to tax the wealthy on the increased value of their stocks and assets just like residents of the state are taxed on the increasing value of their home.
“We are going to treat those unrealized gains like income, because that's what they are for these billionaires, they’re not making income from going to work and getting paid a salary like the rest of us do, they make their income from moving around these esoteric financial instruments and its time we tax that just like we tax the income for everybody else,” Guzzard said.