For the second consecutive year, California has been shrinking in population. Although there are many contributing factors, it is naïve to think that California’s taxes and regulations are not major contributors to this recent exodus. According to statistics reported by U.S. News, almost 280,000 more people left California than moved here and most departed for states with lower or no income taxes, like Nevada, Texas, Florida, Tennessee, Washington, Wyoming and Arizona.
In the 2021 fiscal year, the state of California collected over 265% more tax revenue than New York, which has the second highest tax revenue. For comparison, California brought in $248.18 billion, while New York brought in $93.5 billion, and Texas and Illinois trailed with $65.38 billion and $55.53 billion, respectively. This huge influx of tax dollars in California has caused a budget surplus of $97.5 billion this fiscal year. Even with that surplus, California legislators are again pushing for even higher tax rates and fees to start as early as 2023. The total impact of all of their newly proposed tax bills, propositions and initiatives is unquantifiable as of now, but an estimate of just 13 measures will impose an additional $194.6 billion in additional taxes on California taxpayers if approved. If you compare that figure to the total 2021 tax revenue, those 13 measures alone will cost taxpayers 78% more in taxes.
Now you may wonder where all of our hard-earned money is going. Our Legislature will no doubt tell you it will fund the general welfare of all California citizens. But, is that really the case? We don’t think so!
ACA 11 (Kalra)
One of the measures, ACA 11 (Kalra), accounts for $162.8 billion more paid annually in state taxes. California lawmakers intend to use these additional state taxes to fund comprehensive universal single-payer health care coverage and a health care cost control system with reserves deemed necessary to ensure payment. This bill would impose:
- An annual excise tax of 2.3% on a business’ annual gross receipts greater than $2 million dollars.
- A payroll tax on every employer who pays wages or other compensation to 50 or more California employees for services rendered within or without the state at the rate of 1.25% of the aggregate amount of wages or compensation paid.
- In addition, to this payroll tax, a 1% payroll tax would be imposed on wages or other compensation paid by an employer to California employees in excess $49,900 per employee. This tax would be deducted and withheld from an employee’s compensation each pay period after hitting this minimum threshold.
- Lastly, this bill would impose a State Personal Income CalCare Tax on those persons who have taxable income greater than $149,509 based on the table directly below.
|For taxable income: The marginal rate is:|
|$149,509 but not over $299,508 0.5% of the taxable income|
|$299,509 but not over $599,012 1% of the taxable income|
|$599, 013 but not over $1,299,499 1.5% of the taxable income|
|$1,299,500 but not over $2,484,120 2% of the taxable income|
|$2,448,121 and above 2.5% of the taxable income|
Progressives argue that healthcare is a fundamental right that should be available to all, but the implications of this for both California businesses and individual taxpayers are staggering. Is it not also a fundamental right to be able to keep the money you rightfully earned? California already mandates businesses with fifty or more employees to offer healthcare coverage to their employees, which can be the single most significant and costly employee benefit. Furthermore, employees who sign up for the healthcare benefits offered by their employers are usually required to pay a substantial portion of their health care costs. Accordingly, although both employers and employees actually allocate a significant amount of their hard-earned income to comprehensive healthcare coverage, California lawmakers now want to make both businesses and their employees pay for the healthcare coverage of others as well. This is so even though these same taxpayers already fund Obama’s Affordable Care Act.
Wealth Tax Act (ACA 8/AB 2289)
As if the government wasn’t already taking too much money from hard-working individuals, our lawmakers are also proposing a “wealth tax” again.
The would be an extension of the annual income tax Wealth Tax Act (ACA 8/AB 2289), in which taxpayers may owe additional taxes based on their self-reported net worth. It provides that:
- Beginning on or after January 1, 2023, and before January 1, 2025, a 1.5% annual tax would be imposed on California residents worldwide net worth in excess of $1 billion (or $500 million if married filing separately).
- Beginning January 1, 2025, a 1% tax rate would be imposed on California residents with a worldwide net worth in excess of $50 million (or $25 million if married filing separately).
- An additional 0.5% will be imposed on California residents with a worldwide net worth in excess of $1 billion (or $500 million if married filing separately).
At this point you may be wondering what exactly goes into determining someone’s worldwide net worth. Lawmakers are proposing that everything from offshore accounts to the assets of your dependents will be used to calculate an individual’s worldwide net worth but have excluded “directly held real property” and personal property located out of state for one reason or another. Why? Your guess is as good as mine.
If this ploy to take more of your hard earned money wasn’t bad enough, this measure can also have serious implications on our economy as well. Taking a fraction of people’s wealth only discourages saving for retirement, investment and emergencies. Discouraging investment will create havoc with our stock market and might even cause a crash like we had in 1929.
Furthermore, this proposal also incentivizes debt, as money owed lowers your net worth. This largely benefits those with mortgages and other types of loans. Once again, progressive law makers are attempting to aid the financially irresponsible and punish the economically prudent. Essentially, a wealth tax would act as a negative reinforcer that would incentivize frivolous spending and borrowing instead of productive investments due to the substantial burden it places on saving and the leniency it offers for debt. Even billionaires recognize the benefit of borrowing rather than selling their own stock as the former is never taxed while the latter very often results in taxable capital gain.
These progressive Europhiles, who justify extreme policy proposals by pointing to the success of some implementations in other countries, are blissfully ignoring the failures of the wealth tax. Nine out of 12 European nations that have previously implemented a wealth tax including Austria, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, the Netherlands, Luxembourg, and Sweden, have abandoned the tax citing it to be unworkable. Why? In brief, it led to wealthy people departing the nation or placing their funds offshore. Wealth taxes survive only in Norway, Spain, and Switzerland.
In summation, the proposed universal single-payer health care tax and the wealth tax measures under consideration by our Legislature are just another example of the Democratic party’s outlandish scams to raise even more revenue, while ignoring both California businesses’ cries for less taxes and regulation and families’ cries for lowering the cost of gasoline and food, improving our roads, funding our police and overhauling our broken public education system.