Golden Goose for Dinner

As a member of CLCA’s Legislative Committee, one the greatest benefits to serving in this capacity is the ability to keep your hands on the pulse of California government. With Covid-19 the heart rate of the legislature is running very high and that is not a good thing.

Along with huge amounts of government spending to soothe the effects of government-imposed shutdowns on lower income earners, government has been hit in a much greater impact than spending. Predictable as the setting sun, tax revenues have been impacted. When you shut down an economy and government gets 7.25% or more of most of those transactions, well yes, less tax revenue will be collected.

All those small business owners, called rich people, who pay a majority of California bills (70%), don’t pay income tax when they lose money. Our state also derives huge revenue in tourism, entertainment, travel, amusement parks, sports, and all the ancillary businesses that support them. Those are all near zero in tax revenue. CLCA doesn’t often discus non-trade related legislation, but the two discussed below are so remarkable in their reach, they exceeded that separation.

One would think that California’s leaders would mitigate these obvious revenue losses by cutting spending. Citizens and Taxpayers are all cutting their spending, right? No, here’s where the fact that we live under a Democrat Super majority of over 75% plays out. That majority is most fiscally supported by the special interests of labor unions. Public Employees, Teachers and Public safety for example. NO WAY are you going to reduce their pay (even though many are not working). No way are we going to reduce those pensions with guaranteed income until the last one is pushing up daisies. No, the answer from those we voted into office is, GET MORE MONEY! And this in one of the already highest taxed states in the country!

So, this is tricky right? California already taxes gas, income, and hidden little devils like carbon offset taxes. We already have a proposition to get rid of Prop 13 Property tax protections on the ballot. Who is a minority that California leaders can hold up in the dark alley of Sacramento? The RICH of course… the 1%-ers…those evil folks who make more than you and me. Not enough? Well, let’s tax them on what they own, Their NET WORTH! That way if they have a bad year being industrious (there is a Pandemic going around), California can tax them on what they made in the past, or what they inherited.

As wrong as you may or may not see hitting the rich for more money when they already pay 70% of the bills while representing less than 1% of the population, ask, will it work?. Use the left’s favorite vernacular in your analysis: “Sustainable.” Does the Golden Goose have wings? Did Covid not show us all that most, especially the wealthy workers, can work from anywhere there’s a good internet connection? What is the speed of the 5G network now being built? What is the Tipping Point?

Those answers are not very palatable if you look to the macro future of California. So bad is the outlook that Democrats are also looking to try and TAX those who leave the state! Our government is looking for ways to TAX solutions to problems they are currently creating!

Most of the people the proposed taxes will impact already have homes in other states. Many have businesses here, and all pay huge tax bills already. They will move. They didn’t get rich by throwing away their money. They will take jobs with them, and they could be you client, or your client’s employer! Your vote counts in California. If you want to stay here, ask yourself where the Buck stops.

Now, for those proposed burdensome tax proposals…

AB 1253 (Santiago): Imposes an additional tax on higher-income taxpayers

This bill imposes an additional tax for high Personal Income California taxpayers. The current Proposition 63 has an inflation-adjusted threshold of $1 million. California’s personal income tax rates are already the highest in the nation (tops out at 13.3%). This bill would raise the tax rate by 3.5 percent for California’s wealthiest taxpayers. This would make the new highest rate in California – 16.8%. Advocates for the bill say it would only impact 70,000 taxpayers in the state and bring in an estimated $6.5 billion in annual revenue.

The additional tax would be structured as follows:

Income over $1 million, but not over $2 million, would see additional tax of 1% of the amount over $1 million

Income over $2 million, but not over $5 million, would see additional tax of 2% of the amount over $2 million

Income over $5 million, would see additional tax of 3.5% of the amount over $5 million

AB 2088 (Bonta): Net Worth Tax

This bill was introduced by Assemblymember Rob Bonta (D-Oakland) and more than a dozen fellow Democrat lawmakers. This legislation would establish a first-in-the-nation net worth tax. The tax would apply a 0.4% rate on the portion of a taxpayer’s world-wide net worth that exceeds $30 million (approximately 30,400 people in CA). This wealth tax is estimated to generate $7.5 billion in annual revenue for California’s state government services and would be deposited into the General Fund. It would be the first wealth tax of its kind ever implemented in the United States. – Pete Dufau, CLT, CWM

Pete is President C.I. Chapter, Chairman Birch Financial, Chairman Landscape Water Conservation Foundation, President Ventura County Lincoln Club, Board member Green Industry Co-Op and Golden Oak.