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Business Roundtable issues statement in response to new wealth tax proposal

Rob Lapsley, president of the California Business Roundtable, issued the following statement in response to new legislation that would impose a wealth tax in California:

“This wealth tax proposal is the wrong solution, both now and in the future. California does not have a budget deficit. Instead, we have a reduced surplus, caused mainly by the state’s overreliance on high-wage earners and their volatile income streams. A wealth tax will only further destabilize our budget system and it will encourage even more high-wealth individuals to leave the state entirely. As the governor clearly identified, California has an incredibly progressive tax system already. For the 2020 taxable year, only 13,360 taxpayers paid 25.8 percent of the total personal income tax collected by the state. Further relying on this volatile and highly mobile tax base would only increase the boom-bust cycles that define our budget. We strongly oppose both ACA 3 and AB 259.”

QUICK FACTS:

  • In the recent results for 2020 tax year, only 115,029 taxpayers (the 1.0% with AGI of $1 million or more) paid 44.7% of total personal income tax.
  • Moving up the income ladder, only 13,360 of these taxpayers (the 0.1% with AGI of $5 million or more) paid 25.8%.
  • These payments are in turn heavily dependent on capital gains income, which in the current budget projections are down substantially due to performance in the stock and real estate markets and the virtual collapse of IPOs coming from the tech sector.
  • At least through 2020, the taxable millionaire base (those with a federal AGI of $1 million or more) in the state continued to grow.
  • In the recent tax data from the IRS, the number of California taxpayers in this income class grew 142% between 2011 just prior to the tax increases under Proposition 30 and the latest data in 2020.
  • California’s growth rate, however, was exceeded in other states with no or much lower rate personal income tax, including Idaho at 271%, Utah at 247%, Washington at 228%, Montana at 209%, Arizona at 172%, and Nevada at 153%.
  • These relatively stronger results from states that are also a destination for much of California’s out-migration are an indication that at least a portion of the potential tax base has been leaving the state.
  • While the taxable millionaire base grew at least through 2020, the indications are it could have grown more.
This article was released by the California Business Roundtable.

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