‘Eating the rich’ at the state level
Giving California voters a statewide vote on whether to levy a new tax on the super-rich feels a little like chumming the waters for sharks.
I just saw a Fox Business piece that suggests a majority of likely voters back the idea, even when respondents acknowledge the policy could drive businesses out and cost jobs.
In other words: lots of people are basically saying, “Yeah, it might hurt the economy… but it still feels right.” Politics, and even public policy, is increasingly about the feels.
Here is the referendum:
Ballot Title: Imposes one-time tax on certain individuals and trusts. Initiative constitutional amendment and statute.
Petition Summary:
Imposes one-time tax of up to 5% on taxpayers and trusts with covered assets valued over $1 billion; covered assets include businesses, securities, art, collectibles, and intellectual property, but exclude real property and some pensions and retirement accounts. Allocates 90% of these tax revenues for health care, 10% for food assistance or education-related programs; prohibits using revenues to replace existing funding for these purposes. Exempts such tax revenues from constitutional requirements for school funding, budget reserves, and state spending limit.
The Democrats in California are divided on this issue. Gov. Gavin Newsom is rather rabid in his opposition. You can tell from reading his quotes that he thinks it’s a pretty stupid proposal.
Newsome also points out the obvious, one time wealth taxes like this are mostly symbolic measures that do nothing to address real state budgetary problems. And because it solves nothing, voters and state lawmakers are tempted to make the tax permanent and go back for more revenue, making the rich flee even faster. The negatives clearly outweigh any wishful thinking on the positives.
California may just vote to slap a one-time 5% bill on a handful of billionaires though. The real question is what message that sends to everyone else watching: investors, small-business owners, and the next generation of wealth creators deciding where to plant roots. The state already has a very progressive tax code in place.
Illinois recently voted down maybe an even dumber proposal that has been bandied about at the federal and state levels, which is taxing unrealized gains in the stock market. How can you justify levying taxes on what could end up being losses on paper?
Still, in a federal system, states get to choose their policies but they still don’t get to choose all the economic consequences from the bad policies they enact.
—Ray Nothstine
— The Federalism Beat