How Will California's Proposed Wealth Tax Affect You?
Rental Property Investor · Member since 2019 · 304 posts · 462 votes
AB 2088 establishes a first-in-the-nation net worth tax, setting a 0.4% tax rate on all net worth above $30 million. If successful, Illinois, New York, New Jersey and Connecticut are likely to follow suit. How will this tax effect you and what, if anything, will you do in response?
All a state level tax of this nature will do is further increase the exodus of high earners and businesses out of CA to lower tax states.
Joe Rogan has officially announced he's relocating to TX from Los Angeles and bringing the whole podcast crew along. They'll be broadcasting the JRE from TX in the future. The public reasons he gave for the move: healthy living, freedom, and taxes.
He will save a small fortune trading CA's income tax for TX's excise tax. Good for him IMO.
The truth is that, in this country, we already have a wealth tax. It is called the estate tax, and theoretically, yes, even that is double taxation. An annual wealth tax is egregious and disincentivizes productivity. The moral problem is that most people are willing to vote for it if it doesn't affect them. Slippery slope there... If the 1% leave, do we tax the next 1%, what if they leave?
I'm okay with it as long as this is a state level tax that never makes it to the federal level. Let the states choose. It's like a gentleman smarter than me said, we have "50 laboratories of democracy", let them experiment.
All a state level tax of this nature will do is further increase the exodus of high earners and businesses out of CA to lower tax states.
Joe Rogan has officially announced he's relocating to TX from Los Angeles and bringing the whole podcast crew along. They'll be broadcasting the JRE from TX in the future. The public reasons he gave for the move: healthy living, freedom, and taxes.
He will save a small fortune trading CA's income tax for TX's excise tax. Good for him IMO.
The truth is that, in this country, we already have a wealth tax. It is called the estate tax, and theoretically, yes, even that is double taxation. An annual wealth tax is egregious and disincentivizes productivity. The moral problem is that most people are willing to vote for it if it doesn't affect them. Slippery slope there... If the 1% leave, do we tax the next 1%, what if they leave?
I'm okay with it as long as this is a state level tax that never makes it to the federal level. Let the states choose. It's like a gentleman smarter than me said, we have "50 laboratories of democracy", let them experiment.
This is no different than any other response from politicians to "resolve" a problem. They have a long track record of bringing a rocket launcher to a knife fight! If you read the fine print, leaving CA (like Joe Rogan) will not dissolve you from the tax if it is passed as it specifically states that you will be charged the tax for 10 years after you leave the State. The pandemic has caused major financial crisis at both the state and federal levels (not to mention world wide) but it is TEMPORARY and we have the power to recover from it so long as the politicians don't screw it up (wishful thinking).
I think that net worth taxes are simply ridiculous and what you own, you have already paid your fair share of taxes on. What income you derive from your assets or net worth should absolutely be taxed and those who make $10M plus a year should easily be able to handle an increase in taxes but only on income above X amount and NOT on net worth.
"How will this tax effect you and what, if anything, will you do in response?"
If it was me, I'd become a nicer person and stop being such a parasite on the working poor by keeping them in poverty. At least I think that's how Newsom likes to portray it.
It worked in Gerrmany in the 30s by saying groups of rich people are the cause of all society's problems.
As a non-affected person, I'd buy stock in U-Haul.
The exact language is: For taxpayers who were subject to the Wealth Tax in one of the preceding 10 years, and are no longer residents of this state.
So, anyone who gets out before it's made law doesn't experience the 10 year phaseout. Joe Rogan probably knows this (I'm sure his tax advisors are more than competent) and legislation of this nature most likely heavily influenced his decision to head out and not stick around to find out what happens.
A google search tells us that Joe Rogan's net worth is probably between $50 million and $100 million. Let's cut that in half and assume it's $75 million. Under this new legislation, he pays $180,000 of CA net worth tax annually, on top of his CA income tax. Like I said, he's going to save a small fortune by moving to TX.
Funny, but something tells me the people moving over this legislation aren't going to be renting U-Hauls and doing a DIY move. : )
Its on net worth ABOVE $30M. Let that sink in, If you have over $30m in net worth you would be incredibly stupid to relocate to another place for any tax. If you love CA before the tax, you will love it after the tax. And like any tax you will get used to it. It won't make anybody starve. Full disclosure, I have nowhere close to that much net worth!
"So, anyone who gets out before it's made law doesn't experience the 10 year phaseout."
I'm in OR, you have no clue how tenacious the Cali FTB is in chasing down money. I've had it happen a few times on deals.
"If you have over $30m in net worth you would be incredibly stupid to relocate to another place for any tax."
Happens all the time, Trump's a resident of FL along with a lot of other ex-NYC types.
Toyota moved all their operations to Houston and Apple, oddly enough, happens to make 98% of their profit in Ireland for tax purposes.
You're being naive, people with jobs, skills and money will move, leaving behind those without jobs, skills or money.
If you need an example, a lot of OR (income taxes) PERS (pub retirement) recipients move to WA (no income tax) across the river. OR won't withhold and they get 10% more of their check each month.
I'm in OR, you have no clue how tenacious the Cali FTB is in chasing down money.
Steve...this statement borders on comical. I'm a tax CPA with both clients who are residents of CA and clients who are former residents of CA. I'm fully aware of how aggressive the CA FTB is in the pursuit of revenue.
I'm also comfortable taking a tax position if we have substantial authority. AB 2088 is plainly written and clear who is subject to the wealth tax. Even the CA FTB must work within the law as written.
AB 2088 establishes a first-in-the-nation net worth tax, setting a 0.4% tax rate on all net worth above $30 million. If successful, Illinois, New York, New Jersey and Connecticut are likely to follow suit. How will this tax effect you and what, if anything, will you do in response?
Dennis, great question, and smart of you to ask it directly to us as individuals. Let's talk about this new tax in real terms instead of throwing around platitudes!
This tax will be levied on roughly 30,000 of the 39,510,000 residents of California. That's that top 0.076% of the state (source: https://sanfrancisco.cbslocal.com/2020/08/13/california-legislature-proposes-first-in-the-nation-wealth-tax/). Sadly, I'm not in the top 0.076% of earners. In fact, I'm only in the top 4% of CA earners (I used this website: https://dqydj.com/income-percentile-by-state-calculator/).
This tax will produce $7.5B (that's a "B" for billion) in revenue for CA (same source as above).
I don't know about you, but I've been noticing all this talk about revenue shortages for states and cities as a result of COVID, and I've begun to worry about two things: my property taxes and my community. I'm worried my property taxes will go up because the city, county, and state will need more revenue to fund public services. And I'm worried my community will suffer because my local schools, police departments, fire departments, social services, road repair crews, graffiti abatement crews (this is LA, after all), adult education programs, job placement programs, etc., will receive less funding.
So this tax abates my fears. I think my property taxes are less likely to get hiked, and I think my community will likely benefit from this tax. That's how this tax affects me, and in response, I'll email my state representatives and voice my support.
Great post!
So this tax abates my fears.
You are young, tell me the tax that fixed anything and they didn't need additional taxes down the road to fix the same problem?
This is std govt, pimp a tax that only affects 10% of the people to get the support of the other 90%. Then do it again 10 times, now you've raised everyone's tax. Your property taxes will get raised in any case.
Cali has every tax ever created, yet they still have lousy schools and homeless. If they want to show what they've improved or fixed first, then I'd consider new taxes.
Steve...this statement borders on comical.
Wasn't doubting your abilities, however, last deal guy living in OR got a call from FTB when he sold his OR property. He left Cali like 5 years prior after he bought the property.
YOu have more faith than I do. They can bend the rules any way they want when it comes to tax collections.
I'm pretty sure that the proposal "as-is' will not pass, but I wouldn't be shocked if some version of this did. There are already multiple states and senators calling for something along these lines. My guess is that everyone will likely see a jump in taxes and a few of the "goodies" us RE investors realize - mortgage interest deductions, 1031 and others will be considered. I would also assume investors might end up with some sort of "investment" tax. Things start to get scary when politicians start using wealth and net worth interchangeably, especially when we start talking about a Millionaire tax.
AB 2088 establishes a first-in-the-nation net worth tax, setting a 0.4% tax rate on all net worth above $30 million. If successful, Illinois, New York, New Jersey and Connecticut are likely to follow suit. How will this tax effect you and what, if anything, will you do in response?
Good point about other coast states following suit.
So how about it? Anyone active here on BP with a net worth significantly greater than $30 million?
I wonder how something like this would be implemented. Would all real estate holdings be given an assessment at year-end? Private equity holdings, alt-investments and other illiquid portfolios consisting primarily of Level 3 positions that do year-end mark to market accounting might not be too much of a problem. What about syndicated investments? Most of my K-1's were based on cost... don't think I saw much in terms of market value.
If you are a business owner, I assume that would be subject to valuation every year?
I wonder how much the group of morons who came up with this idea actually thought this through? (other than the political angle, of course)
Its on net worth ABOVE $30M. Let that sink in, If you have over $30m in net worth you would be incredibly stupid to relocate to another place for any tax. If you love CA before the tax, you will love it after the tax. And like any tax you will get used to it. It won't make anybody starve. Full disclosure, I have nowhere close to that much net worth!
LOL, I love this post and almost feel the same way. I love CA and never want to leave!
But do you remember when you were young and thought 100K was a lot of money? But then once you had 100K in cash or assets, you realized it wasn't such a big deal? Then when you made your first million, once again, you realized that it wasn't the big deal you once thought it was? Hell, you're a millionaire, but so is everyone else in Los Angeles and SF. A million dollars is won't even come close to buying you a TINY apartment in cities like Seoul, Tokyo, HK and I presume some cities in Singapore. Then when you made $2 million.... and so on, you went through the same line of reasoning and all you can think about is growing your net worth. I suspect folks who have $30 million or more to their name feel the same way and are constantly thinking of how to grow their $30 million into $60 million. If I ever reach that point, I'm sure I would still spend a lot of time in LA, but I would also move my official residence to a more tax-friendly area. Heck, it most likely won't even be the US.
@Jon Schwartz
People probably said the same thing about the alternative minimum tac (AMT).
“It only impacts the top 155 people, not my problem.” In 2017, 5.2 million Americans were paying it.
That's 1.58% of Americans, and unfortunately, it's not the top 1.58% of earners. AMT has its own problems, which Congress has tried to address by indexing the exemption to inflation.
Comparing an additional 0.4% tax on the highest 0.076% of earners in response to a pandemic and its drain on government revenue does not call for the "if they aren't coming me, then I'm safe" logic fallacy (ie, the slippery slope fallacy).
AB 2088 establishes a first-in-the-nation net worth tax, setting a 0.4% tax rate on all net worth above $30 million. If successful, Illinois, New York, New Jersey and Connecticut are likely to follow suit. How will this tax effect you and what, if anything, will you do in response?
Dennis, great question, and smart of you to ask it directly to us as individuals. Let's talk about this new tax in real terms instead of throwing around platitudes!
This tax will be levied on roughly 30,000 of the 39,510,000 residents of California. That's that top 0.076% of the state (source: https://sanfrancisco.cbslocal.com/2020/08/13/california-legislature-proposes-first-in-the-nation-wealth-tax/). Sadly, I'm not in the top 0.076% of earners. In fact, I'm only in the top 4% of CA earners (I used this website: https://dqydj.com/income-percentile-by-state-calculator/).
This tax will produce $7.5B (that's a "B" for billion) in revenue for CA (same source as above).
I don't know about you, but I've been noticing all this talk about revenue shortages for states and cities as a result of COVID, and I've begun to worry about two things: my property taxes and my community. I'm worried my property taxes will go up because the city, county, and state will need more revenue to fund public services. And I'm worried my community will suffer because my local schools, police departments, fire departments, social services, road repair crews, graffiti abatement crews (this is LA, after all), adult education programs, job placement programs, etc., will receive less funding.
So this tax abates my fears. I think my property taxes are less likely to get hiked, and I think my community will likely benefit from this tax. That's how this tax affects me, and in response, I'll email my state representatives and voice my support.
Great post!
I hear your points Jon, but I fail to see how charging 30,000 people $250,000 a better solution than charging 39,510,000 people $190?
I concede that we shouldn't be responsible for supporting the government in the same amount, and will illustrate supporting CA on a sliding scale. I wish I had time to put in more research, but I'll lean on the easiest tax revenue for me to reference for the state, being income tax. If 7.5 B is the problem, that represents a 9.3% increase over the 79.998970205 Billion https://data.ftb.ca.gov/PIT-Charts/Personal-Income-Tax-Liability-Column-Chart/5ss3-24b3 collected in income tax from Californians (at least in 2017)
My share of that would be under $2,000, I can't imagine that your "fair" share is not bearable for you, although I remember the impact of mortgage payments took a while to get used to :).
Why are we expectant that the top 30,000 earners in CA should pay for this state which has given me ample opportunity to put myself in a position to retire to where I want to live, and provided you with the ability to work/retire/live where you want to? You are on a trajectory where these decisions will affect you directly someday. "I support it, because it's not coming out of my pocket" seems shortsighted considering the 30 million threshold will lower, the .4% rate will increase, and inflation will push more and more CA taxpayers into this tax bracket.
AB 2088 establishes a first-in-the-nation net worth tax, setting a 0.4% tax rate on all net worth above $30 million. If successful, Illinois, New York, New Jersey and Connecticut are likely to follow suit. How will this tax effect you and what, if anything, will you do in response?
Dennis, great question, and smart of you to ask it directly to us as individuals. Let's talk about this new tax in real terms instead of throwing around platitudes!
This tax will be levied on roughly 30,000 of the 39,510,000 residents of California. That's that top 0.076% of the state (source: https://sanfrancisco.cbslocal.com/2020/08/13/california-legislature-proposes-first-in-the-nation-wealth-tax/). Sadly, I'm not in the top 0.076% of earners. In fact, I'm only in the top 4% of CA earners (I used this website: https://dqydj.com/income-percentile-by-state-calculator/).
This tax will produce $7.5B (that's a "B" for billion) in revenue for CA (same source as above).
I don't know about you, but I've been noticing all this talk about revenue shortages for states and cities as a result of COVID, and I've begun to worry about two things: my property taxes and my community. I'm worried my property taxes will go up because the city, county, and state will need more revenue to fund public services. And I'm worried my community will suffer because my local schools, police departments, fire departments, social services, road repair crews, graffiti abatement crews (this is LA, after all), adult education programs, job placement programs, etc., will receive less funding.
So this tax abates my fears. I think my property taxes are less likely to get hiked, and I think my community will likely benefit from this tax. That's how this tax affects me, and in response, I'll email my state representatives and voice my support.
Great post!
I hear your points Jon, but I fail to see how charging 30,000 people $250,000 a better solution than charging 39,510,000 people $190?
I concede that we shouldn't be responsible for supporting the government in the same amount, and will illustrate supporting CA on a sliding scale. I wish I had time to put in more research, but I'll lean on the easiest tax revenue for me to reference for the state, being income tax. If 7.5 B is the problem, that represents a 9.3% increase over the 79.998970205 Billion https://data.ftb.ca.gov/PIT-Charts/Personal-Income-Tax-Liability-Column-Chart/5ss3-24b3 collected in income tax from Californians (at least in 2017)
My share of that would be under $2,000, I can't imagine that your "fair" share is not bearable for you, although I remember the impact of mortgage payments took a while to get used to :).
Why are we expectant that the top 30,000 earners in CA should pay for this state which has given me ample opportunity to put myself in a position to retire to where I want to live, and provided you with the ability to work/retire/live where you want to? You are on a trajectory where these decisions will affect you directly someday. "I support it, because it's not coming out of my pocket" seems shortsighted considering the 30 million threshold will lower, the .4% rate will increase, and inflation will push more and more CA taxpayers into this tax bracket.
Hey Todd!
Thanks for the well-reasoned, sourced, and thoughtful comment!
You're totally right that my argument came off as "I support it because it's not coming out of my pocket." I was being tongue-in-cheek in my initial response, and I definitely gave the impression you took. Guilty as charged!
My truer sentiment is simply that I support progressive taxation -- "progressive" not meaning "liberal," but "progressive" meaning that higher earners progressively pay a larger percentage of their income to taxes.
Before anybody hits me with a ridiculous slippery slope rebuttal, let me say that I do believe all policy should be within reason. A 0.4% surcharge tax on the extremely wealthy is not the same as raising all tax brackets by 40%. Let's that scream platitudes from the fringes of the debate; let's talk realities.
The problematic truth is that low earners don't have enough money to generate any savings. Everything they earn, they spend to survive in this country. The savings rate reaches 0% as earners reach $40K in annual income; people who earn under $40K/year have negative savings rates; by $80K, an individual's savings rate is 22%; over $250K in annual income and one's savings rate averages 42% (source: https://dqydj.com/how-much-do-people-save-by-income/). You know as well as I that, without the ability to save, a person doesn't have the ability to prepare for retirement, much less "get ahead."
So I think it's moral and community-minded to implement a progressive tax strategy that takes more from the very wealthy and gives a break to the working poor. I know I pay more in taxes than many others while utilizing relatively few of the public services I fund; I'm okay with that.
One more thought: you calculate that your "fair" share is $2000. What's fair, though? Is it a simple math problem? Is there a moral element to fairness? I'd say there is.
AB 2088 establishes a first-in-the-nation net worth tax, setting a 0.4% tax rate on all net worth above $30 million. If successful, Illinois, New York, New Jersey and Connecticut are likely to follow suit. How will this tax effect you and what, if anything, will you do in response?
Dennis, great question, and smart of you to ask it directly to us as individuals. Let's talk about this new tax in real terms instead of throwing around platitudes!
This tax will be levied on roughly 30,000 of the 39,510,000 residents of California. That's that top 0.076% of the state (source: https://sanfrancisco.cbslocal.com/2020/08/13/california-legislature-proposes-first-in-the-nation-wealth-tax/). Sadly, I'm not in the top 0.076% of earners. In fact, I'm only in the top 4% of CA earners (I used this website: https://dqydj.com/income-percentile-by-state-calculator/).
This tax will produce $7.5B (that's a "B" for billion) in revenue for CA (same source as above).
I don't know about you, but I've been noticing all this talk about revenue shortages for states and cities as a result of COVID, and I've begun to worry about two things: my property taxes and my community. I'm worried my property taxes will go up because the city, county, and state will need more revenue to fund public services. And I'm worried my community will suffer because my local schools, police departments, fire departments, social services, road repair crews, graffiti abatement crews (this is LA, after all), adult education programs, job placement programs, etc., will receive less funding.
So this tax abates my fears. I think my property taxes are less likely to get hiked, and I think my community will likely benefit from this tax. That's how this tax affects me, and in response, I'll email my state representatives and voice my support.
Great post!
I hear your points Jon, but I fail to see how charging 30,000 people $250,000 a better solution than charging 39,510,000 people $190?
I concede that we shouldn't be responsible for supporting the government in the same amount, and will illustrate supporting CA on a sliding scale. I wish I had time to put in more research, but I'll lean on the easiest tax revenue for me to reference for the state, being income tax. If 7.5 B is the problem, that represents a 9.3% increase over the 79.998970205 Billion https://data.ftb.ca.gov/PIT-Charts/Personal-Income-Tax-Liability-Column-Chart/5ss3-24b3 collected in income tax from Californians (at least in 2017)
My share of that would be under $2,000, I can't imagine that your "fair" share is not bearable for you, although I remember the impact of mortgage payments took a while to get used to :).
Why are we expectant that the top 30,000 earners in CA should pay for this state which has given me ample opportunity to put myself in a position to retire to where I want to live, and provided you with the ability to work/retire/live where you want to? You are on a trajectory where these decisions will affect you directly someday. "I support it, because it's not coming out of my pocket" seems shortsighted considering the 30 million threshold will lower, the .4% rate will increase, and inflation will push more and more CA taxpayers into this tax bracket.
Hey Todd!
Thanks for the well-reasoned, sourced, and thoughtful comment!
You're totally right that my argument came off as "I support it because it's not coming out of my pocket." I was being tongue-in-cheek in my initial response, and I definitely gave the impression you took. Guilty as charged!
My truer sentiment is simply that I support progressive taxation -- "progressive" not meaning "liberal," but "progressive" meaning that higher earners progressively pay a larger percentage of their income to taxes.
Before anybody hits me with a ridiculous slippery slope rebuttal, let me say that I do believe all policy should be within reason. A 0.4% surcharge tax on the extremely wealthy is not the same as raising all tax brackets by 40%. Let's that scream platitudes from the fringes of the debate; let's talk realities.
The problematic truth is that low earners don't have enough money to generate any savings. Everything they earn, they spend to survive in this country. The savings rate reaches 0% as earners reach $40K in annual income; people who earn under $40K/year have negative savings rates; by $80K, an individual's savings rate is 22%; over $250K in annual income and one's savings rate averages 42% (source: https://dqydj.com/how-much-do-people-save-by-income/). You know as well as I that, without the ability to save, a person doesn't have the ability to prepare for retirement, much less "get ahead."
So I think it's moral and community-minded to implement a progressive tax strategy that takes more from the very wealthy and gives a break to the working poor. I know I pay more in taxes than many others while utilizing relatively few of the public services I fund; I'm okay with that.
One more thought: you calculate that your "fair" share is $2000. What's fair, though? Is it a simple math problem? Is there a moral element to fairness? I'd say there is.
I'm grateful, "Not my problem" is not the source of your consideration! It's hard to read intent over text.
As a sometimes reasonable Libertarian, I would much prefer a flat rate taxation method on income without deductions as taxing everyone the same percent still accomplishes wealth balancing without nearly the amount of effort required to file your taxes currently.
I accept that progressive taxation is as close to my preferred method as I can expect us to get. The <$2,000 that is my fair share is a math equation that illustrates spreading the 7.5 Billion across our current progressive tax structure, instead of implementing a wealth tax. CA brought in 79.99.... billion in income taxes and needs an additional 7.5, which is a 9.3% increase. Multiply your total state income tax last year by .093 and that is your share of generating an additional 7.5 billion for the state. Id rather pay my portion of that than ask someone else to on my behalf.
I think the moral aspect of taxes is that people should contribute equally as able, which is the basis of my flat rate taxation dream. I think, however in your moral aspect comment you were alluding towards supporting taxes that support those without? I do, because most people are compassionate to the limits of their own convenience, but I've never seen a dollar with the government go even close to as far as a dollar I've given my church, any other charitable organization, or any person who needed some help.
AB 2088 establishes a first-in-the-nation net worth tax, setting a 0.4% tax rate on all net worth above $30 million. If successful, Illinois, New York, New Jersey and Connecticut are likely to follow suit. How will this tax effect you and what, if anything, will you do in response?
Dennis, great question, and smart of you to ask it directly to us as individuals. Let's talk about this new tax in real terms instead of throwing around platitudes!
This tax will be levied on roughly 30,000 of the 39,510,000 residents of California. That's that top 0.076% of the state (source: https://sanfrancisco.cbslocal.com/2020/08/13/california-legislature-proposes-first-in-the-nation-wealth-tax/). Sadly, I'm not in the top 0.076% of earners. In fact, I'm only in the top 4% of CA earners (I used this website: https://dqydj.com/income-percentile-by-state-calculator/).
This tax will produce $7.5B (that's a "B" for billion) in revenue for CA (same source as above).
I don't know about you, but I've been noticing all this talk about revenue shortages for states and cities as a result of COVID, and I've begun to worry about two things: my property taxes and my community. I'm worried my property taxes will go up because the city, county, and state will need more revenue to fund public services. And I'm worried my community will suffer because my local schools, police departments, fire departments, social services, road repair crews, graffiti abatement crews (this is LA, after all), adult education programs, job placement programs, etc., will receive less funding.
So this tax abates my fears. I think my property taxes are less likely to get hiked, and I think my community will likely benefit from this tax. That's how this tax affects me, and in response, I'll email my state representatives and voice my support.
Great post!
I hear your points Jon, but I fail to see how charging 30,000 people $250,000 a better solution than charging 39,510,000 people $190?
I concede that we shouldn't be responsible for supporting the government in the same amount, and will illustrate supporting CA on a sliding scale. I wish I had time to put in more research, but I'll lean on the easiest tax revenue for me to reference for the state, being income tax. If 7.5 B is the problem, that represents a 9.3% increase over the 79.998970205 Billion https://data.ftb.ca.gov/PIT-Charts/Personal-Income-Tax-Liability-Column-Chart/5ss3-24b3 collected in income tax from Californians (at least in 2017)
My share of that would be under $2,000, I can't imagine that your "fair" share is not bearable for you, although I remember the impact of mortgage payments took a while to get used to :).
Why are we expectant that the top 30,000 earners in CA should pay for this state which has given me ample opportunity to put myself in a position to retire to where I want to live, and provided you with the ability to work/retire/live where you want to? You are on a trajectory where these decisions will affect you directly someday. "I support it, because it's not coming out of my pocket" seems shortsighted considering the 30 million threshold will lower, the .4% rate will increase, and inflation will push more and more CA taxpayers into this tax bracket.
Hey Todd!
Thanks for the well-reasoned, sourced, and thoughtful comment!
You're totally right that my argument came off as "I support it because it's not coming out of my pocket." I was being tongue-in-cheek in my initial response, and I definitely gave the impression you took. Guilty as charged!
My truer sentiment is simply that I support progressive taxation -- "progressive" not meaning "liberal," but "progressive" meaning that higher earners progressively pay a larger percentage of their income to taxes.
Before anybody hits me with a ridiculous slippery slope rebuttal, let me say that I do believe all policy should be within reason. A 0.4% surcharge tax on the extremely wealthy is not the same as raising all tax brackets by 40%. Let's that scream platitudes from the fringes of the debate; let's talk realities.
The problematic truth is that low earners don't have enough money to generate any savings. Everything they earn, they spend to survive in this country. The savings rate reaches 0% as earners reach $40K in annual income; people who earn under $40K/year have negative savings rates; by $80K, an individual's savings rate is 22%; over $250K in annual income and one's savings rate averages 42% (source: https://dqydj.com/how-much-do-people-save-by-income/). You know as well as I that, without the ability to save, a person doesn't have the ability to prepare for retirement, much less "get ahead."
So I think it's moral and community-minded to implement a progressive tax strategy that takes more from the very wealthy and gives a break to the working poor. I know I pay more in taxes than many others while utilizing relatively few of the public services I fund; I'm okay with that.
One more thought: you calculate that your "fair" share is $2000. What's fair, though? Is it a simple math problem? Is there a moral element to fairness? I'd say there is.
Jon, thanks for posting a nuanced comment. I have a comment and a question if you don't mind.
Comment: CA already has a progressive tax structure for income. This isn't that. In effect wealth taxes are a form of capital gains. Lets face it, most of the assets impacted by this are in the form of assets, either public or private, not cash. If I have a $100k home that appreciates at 2% a year, the absolute taxes paid goes up every year. If you take the present value of the wealth taxes paid, you'll see that the net taxes paid got up over time. It's 2% at five years, 4% at ten years, and 9% at 20 years. That is in addition to the capital gains/income portion of the tax we already have. That is a long way from .4%. This further serves to disincentives long term ownership of assets.
Wealth taxes also encourage higher levels of borrowing since the wealth tax calculations usually boil down to some form of assets-liabilities; this also further destabilizing effects.
Question: all the points you raised about about savings rates are well taken and its humbling to see others who take being part of a community so seriously. However, why do you need to transfer your morality onto others? If you feel this is a problem there are other avenues to address the issue besides dipping into other people's savings, mainly charitable or religious organizations, which those who share your conviction are free to avail themselves too. Others may not share your perspective on this issue or chose to give via other means so why should they be forced to address an issue you care about or they already address in another way?
It is also interesting that Wealth Taxes have fallen in popularity in other OCED countries in the 30 years. The main reason? they don't bring in enough revenue to be worth the administrative costs. Mind you, these are countries that had much lower thresholds to qualify for the tax. That leads me to believe that this is a poorly thought out proposal or more of an expression of emotions than a real policy solution; the issue is that this further divides our country deeper into us vs them territory and IMHO, that is the last thing we need.
Thanks again for your stimulating comment.
but "progressive" meaning that higher earners progressively pay a larger percentage of their income to taxes.
They do already. You make <$50K and odds are you're paying $0 in Fed Taxes (or less with EITC).
From Yahoo:
The top 1% of taxpayers — those who earn $515,371 or more — paid 38.47% of the total tax revenue collected in 2017, according to the latest figures from the IRS.
Think the "progressive" is an excuse to raise taxes while schools are still lousy and homeless are teeming. Killing the rich is NOT the solution for our problems. It's always easy to blame the rich for our problems isn't it?
You're young - You'll learn
I think the moral aspect of taxes is that people should contribute equally as able, which is the basis of my flat rate taxation dream.
"As able" doesn't jive with flat tax. Explain.
I have nothing against a flat tax.
However, "as able" should apply on both sides, even if you consume a ton of tax dollars, if you're capable of paying a percentage of your income in taxes, shouldn't you?
AB 2088 establishes a first-in-the-nation net worth tax, setting a 0.4% tax rate on all net worth above $30 million. If successful, Illinois, New York, New Jersey and Connecticut are likely to follow suit. How will this tax effect you and what, if anything, will you do in response?
Dennis, great question, and smart of you to ask it directly to us as individuals. Let's talk about this new tax in real terms instead of throwing around platitudes!
This tax will be levied on roughly 30,000 of the 39,510,000 residents of California. That's that top 0.076% of the state (source: https://sanfrancisco.cbslocal.com/2020/08/13/california-legislature-proposes-first-in-the-nation-wealth-tax/). Sadly, I'm not in the top 0.076% of earners. In fact, I'm only in the top 4% of CA earners (I used this website: https://dqydj.com/income-percentile-by-state-calculator/).
This tax will produce $7.5B (that's a "B" for billion) in revenue for CA (same source as above).
I don't know about you, but I've been noticing all this talk about revenue shortages for states and cities as a result of COVID, and I've begun to worry about two things: my property taxes and my community. I'm worried my property taxes will go up because the city, county, and state will need more revenue to fund public services. And I'm worried my community will suffer because my local schools, police departments, fire departments, social services, road repair crews, graffiti abatement crews (this is LA, after all), adult education programs, job placement programs, etc., will receive less funding.
So this tax abates my fears. I think my property taxes are less likely to get hiked, and I think my community will likely benefit from this tax. That's how this tax affects me, and in response, I'll email my state representatives and voice my support.
Great post!
I hear your points Jon, but I fail to see how charging 30,000 people $250,000 a better solution than charging 39,510,000 people $190?
I concede that we shouldn't be responsible for supporting the government in the same amount, and will illustrate supporting CA on a sliding scale. I wish I had time to put in more research, but I'll lean on the easiest tax revenue for me to reference for the state, being income tax. If 7.5 B is the problem, that represents a 9.3% increase over the 79.998970205 Billion https://data.ftb.ca.gov/PIT-Charts/Personal-Income-Tax-Liability-Column-Chart/5ss3-24b3 collected in income tax from Californians (at least in 2017)
My share of that would be under $2,000, I can't imagine that your "fair" share is not bearable for you, although I remember the impact of mortgage payments took a while to get used to :).
Why are we expectant that the top 30,000 earners in CA should pay for this state which has given me ample opportunity to put myself in a position to retire to where I want to live, and provided you with the ability to work/retire/live where you want to? You are on a trajectory where these decisions will affect you directly someday. "I support it, because it's not coming out of my pocket" seems shortsighted considering the 30 million threshold will lower, the .4% rate will increase, and inflation will push more and more CA taxpayers into this tax bracket.
Hey Todd!
Thanks for the well-reasoned, sourced, and thoughtful comment!
You're totally right that my argument came off as "I support it because it's not coming out of my pocket." I was being tongue-in-cheek in my initial response, and I definitely gave the impression you took. Guilty as charged!
My truer sentiment is simply that I support progressive taxation -- "progressive" not meaning "liberal," but "progressive" meaning that higher earners progressively pay a larger percentage of their income to taxes.
Before anybody hits me with a ridiculous slippery slope rebuttal, let me say that I do believe all policy should be within reason. A 0.4% surcharge tax on the extremely wealthy is not the same as raising all tax brackets by 40%. Let's that scream platitudes from the fringes of the debate; let's talk realities.
The problematic truth is that low earners don't have enough money to generate any savings. Everything they earn, they spend to survive in this country. The savings rate reaches 0% as earners reach $40K in annual income; people who earn under $40K/year have negative savings rates; by $80K, an individual's savings rate is 22%; over $250K in annual income and one's savings rate averages 42% (source: https://dqydj.com/how-much-do-people-save-by-income/). You know as well as I that, without the ability to save, a person doesn't have the ability to prepare for retirement, much less "get ahead."
So I think it's moral and community-minded to implement a progressive tax strategy that takes more from the very wealthy and gives a break to the working poor. I know I pay more in taxes than many others while utilizing relatively few of the public services I fund; I'm okay with that.
One more thought: you calculate that your "fair" share is $2000. What's fair, though? Is it a simple math problem? Is there a moral element to fairness? I'd say there is.
I'm grateful, "Not my problem" is not the source of your consideration! It's hard to read intent over text.
As a sometimes reasonable Libertarian, I would much prefer a flat rate taxation method on income without deductions as taxing everyone the same percent still accomplishes wealth balancing without nearly the amount of effort required to file your taxes currently.
I accept that progressive taxation is as close to my preferred method as I can expect us to get. The <$2,000 that is my fair share is a math equation that illustrates spreading the 7.5 Billion across our current progressive tax structure, instead of implementing a wealth tax. CA brought in 79.99.... billion in income taxes and needs an additional 7.5, which is a 9.3% increase. Multiply your total state income tax last year by .093 and that is your share of generating an additional 7.5 billion for the state. Id rather pay my portion of that than ask someone else to on my behalf.
I think the moral aspect of taxes is that people should contribute equally as able, which is the basis of my flat rate taxation dream. I think, however in your moral aspect comment you were alluding towards supporting taxes that support those without? I do, because most people are compassionate to the limits of their own convenience, but I've never seen a dollar with the government go even close to as far as a dollar I've given my church, any other charitable organization, or any person who needed some help.
Todd, I always appreciate a cordial disagreement. Thanks so much!
First off, if we have differing views on what's fair, I'm defining not knocking yours as inferior on any metric. I value your viewpoint.
Just want to throw out my two cents on your last point there: I have a brother-in-law, a conservative Republican, who frequently says, "I'd be happy to pay taxes if the government actually did something worthwhile with the money." Frankly, I think that's an excuse for not wanting to pay taxes at all. Isn't educating children worth taxes? Aren't police worth taxes? We can debate how far our social programs should go, but there's obviously worth to a portion of them.
To your point more specifically: your church or a needy individual can surely make a dollar go further than the government. There's a lot of overhead with the government. And if everybody of there own volition contributed 10-40% of their income to a charitable organization run by volunteers for the administration of social services, yeah, our financial contribution to the greater American good would go a lot further. But an argument against government overhead doesn't negate the need for government.
So this tax abates my fears.
You are young, tell me the tax that fixed anything and they didn't need additional taxes down the road to fix the same problem?
This is std govt, pimp a tax that only affects 10% of the people to get the support of the other 90%. Then do it again 10 times, now you've raised everyone's tax. Your property taxes will get raised in any case.
Cali has every tax ever created, yet they still have lousy schools and homeless. If they want to show what they've improved or fixed first, then I'd consider new taxes.
Steve, the crime rate in California is half what it was in 1980 (source: https://www.ppic.org/publication/crime-trends-in-california/#:~:text=California's%20violent%20crime%20rate%20rose,levels%20in%20the%20late%201960s.). Does that count as something the government has improved with tax money? Are you ready to consider new taxes.
I'm young? How old are you, Steve?
AB 2088 establishes a first-in-the-nation net worth tax, setting a 0.4% tax rate on all net worth above $30 million. If successful, Illinois, New York, New Jersey and Connecticut are likely to follow suit. How will this tax effect you and what, if anything, will you do in response?
Dennis, great question, and smart of you to ask it directly to us as individuals. Let's talk about this new tax in real terms instead of throwing around platitudes!
This tax will be levied on roughly 30,000 of the 39,510,000 residents of California. That's that top 0.076% of the state (source: https://sanfrancisco.cbslocal.com/2020/08/13/california-legislature-proposes-first-in-the-nation-wealth-tax/). Sadly, I'm not in the top 0.076% of earners. In fact, I'm only in the top 4% of CA earners (I used this website: https://dqydj.com/income-percentile-by-state-calculator/).
This tax will produce $7.5B (that's a "B" for billion) in revenue for CA (same source as above).
I don't know about you, but I've been noticing all this talk about revenue shortages for states and cities as a result of COVID, and I've begun to worry about two things: my property taxes and my community. I'm worried my property taxes will go up because the city, county, and state will need more revenue to fund public services. And I'm worried my community will suffer because my local schools, police departments, fire departments, social services, road repair crews, graffiti abatement crews (this is LA, after all), adult education programs, job placement programs, etc., will receive less funding.
So this tax abates my fears. I think my property taxes are less likely to get hiked, and I think my community will likely benefit from this tax. That's how this tax affects me, and in response, I'll email my state representatives and voice my support.
Great post!
I hear your points Jon, but I fail to see how charging 30,000 people $250,000 a better solution than charging 39,510,000 people $190?
I concede that we shouldn't be responsible for supporting the government in the same amount, and will illustrate supporting CA on a sliding scale. I wish I had time to put in more research, but I'll lean on the easiest tax revenue for me to reference for the state, being income tax. If 7.5 B is the problem, that represents a 9.3% increase over the 79.998970205 Billion https://data.ftb.ca.gov/PIT-Charts/Personal-Income-Tax-Liability-Column-Chart/5ss3-24b3 collected in income tax from Californians (at least in 2017)
My share of that would be under $2,000, I can't imagine that your "fair" share is not bearable for you, although I remember the impact of mortgage payments took a while to get used to :).
Why are we expectant that the top 30,000 earners in CA should pay for this state which has given me ample opportunity to put myself in a position to retire to where I want to live, and provided you with the ability to work/retire/live where you want to? You are on a trajectory where these decisions will affect you directly someday. "I support it, because it's not coming out of my pocket" seems shortsighted considering the 30 million threshold will lower, the .4% rate will increase, and inflation will push more and more CA taxpayers into this tax bracket.
Hey Todd!
Thanks for the well-reasoned, sourced, and thoughtful comment!
You're totally right that my argument came off as "I support it because it's not coming out of my pocket." I was being tongue-in-cheek in my initial response, and I definitely gave the impression you took. Guilty as charged!
My truer sentiment is simply that I support progressive taxation -- "progressive" not meaning "liberal," but "progressive" meaning that higher earners progressively pay a larger percentage of their income to taxes.
Before anybody hits me with a ridiculous slippery slope rebuttal, let me say that I do believe all policy should be within reason. A 0.4% surcharge tax on the extremely wealthy is not the same as raising all tax brackets by 40%. Let's that scream platitudes from the fringes of the debate; let's talk realities.
The problematic truth is that low earners don't have enough money to generate any savings. Everything they earn, they spend to survive in this country. The savings rate reaches 0% as earners reach $40K in annual income; people who earn under $40K/year have negative savings rates; by $80K, an individual's savings rate is 22%; over $250K in annual income and one's savings rate averages 42% (source: https://dqydj.com/how-much-do-people-save-by-income/). You know as well as I that, without the ability to save, a person doesn't have the ability to prepare for retirement, much less "get ahead."
So I think it's moral and community-minded to implement a progressive tax strategy that takes more from the very wealthy and gives a break to the working poor. I know I pay more in taxes than many others while utilizing relatively few of the public services I fund; I'm okay with that.
One more thought: you calculate that your "fair" share is $2000. What's fair, though? Is it a simple math problem? Is there a moral element to fairness? I'd say there is.
Jon, thanks for posting a nuanced comment. I have a comment and a question if you don't mind.
Comment: CA already has a progressive tax structure for income. This isn't that. In effect wealth taxes are a form of capital gains. Lets face it, most of the assets impacted by this are in the form of assets, either public or private, not cash. If I have a $100k home that appreciates at 2% a year, the absolute taxes paid goes up every year. If you take the present value of the wealth taxes paid, you'll see that the net taxes paid got up over time. It's 2% at five years, 4% at ten years, and 9% at 20 years. That is in addition to the capital gains/income portion of the tax we already have. That is a long way from .4%. This further serves to disincentives long term ownership of assets.
Wealth taxes also encourage higher levels of borrowing since the wealth tax calculations usually boil down to some form of assets-liabilities; this also further destabilizing effects.
Question: all the points you raised about about savings rates are well taken and its humbling to see others who take being part of a community so seriously. However, why do you need to transfer your morality onto others? If you feel this is a problem there are other avenues to address the issue besides dipping into other people's savings, mainly charitable or religious organizations, which those who share your conviction are free to avail themselves too. Others may not share your perspective on this issue or chose to give via other means so why should they be forced to address an issue you care about or they already address in another way?
It is also interesting that Wealth Taxes have fallen in popularity in other OCED countries in the 30 years. The main reason? they don't bring in enough revenue to be worth the administrative costs. Mind you, these are countries that had much lower thresholds to qualify for the tax. That leads me to believe that this is a poorly thought out proposal or more of an expression of emotions than a real policy solution; the issue is that this further divides our country deeper into us vs them territory and IMHO, that is the last thing we need.
Thanks again for your stimulating comment.
Bill, I greatly appreciate your civility. I'm a fan of any guy who knows how to wear a blue blazer well!
Good points, good points! I'm interested in answering your question.
I'm trying to find a way to say this... I'm interested in transferring my morality onto others because I'm human. I'm politically liberal, so you can guess the other social and economic issues I want to transfer onto others, as well. We as Americans are fortunate to live in a political system where individuals fight for their priorities, fight to elect those who will enact them, etc. etc. etc. It's totally fair as an economically conservative person to disagree with me just as a socially conservative person will disagree me with on other issues. We'll settle it at the ballot box, right?
Furthermore, the effects of progressive taxation dwarf the effects of charitable giving. Charities can help individuals, small communities, etc. I'd say only the government has the ability to combat the staggering wealth inequality that has developed in America over the last half century. I think it's for the greater good of the whole country if we have less wealth inequality.
I know I'm throwing out some liberal ideas; yes, I'm a real-estate investor and a liberal!