Tax the rich? Liberals renew push for state wealth taxes

Tax the rich? Liberals renew push for state wealth taxes

Supporters of taxes on the very wealthy contend that persons are rising from the COVID-19 pandemic with a much bigger urge for food for what they’re calling “tax justice.”

Bills introduced Thursday in California, New York, Illinois, Hawaii, Maryland, Minnesota, Washington and Connecticut differ of their approaches to mountaineering taxes, however all revolve round the concept that the richest Americans must pay extra.

All of the proposals face questionable prospects. Similar laws has died in state legislatures and Congress. But the new push exhibits that the political left isn’t prepared to surrender on the populist argument that authorities can and ought to be used as a device for redistributing wealth.

“Under the pandemic, whereas individuals struggled to place meals on the desk, we noticed billionaires double their wealth,” mentioned California Assembly Member Alex Lee, a Democrat.

The Tax Foundation, a conservative-leaning coverage group, known as wealth taxes — which levy taxes not simply on new revenue, however on an individual’s complete belongings — “economically harmful.”

It additionally mentioned in a press release that such taxes create “perverse incentives” for the wealthy to keep away from taxes, together with merely shifting to states with a decrease tax burden.

“Very few taxpayers would remit wealth taxes — however many extra would pay the worth,” the group mentioned in a press release. Progressive Democrats, nonetheless, argue they aren’t seeing rich taxpayers leaving their states because of greater taxes.

California already taxes the rich greater than most states. The high 1% of earners account for about half of the state’s revenue tax collections. But this week, Lee proposed a “wealth tax,” just like one promoted for years by U.S. Sen. Elizabeth Warren, a Massachusetts Democrat.

It would impose an annual tax of 1.5% on belongings of greater than $1 billion and 1% on belongings of $50 million or extra. The new tax on wealth, not annual revenue, would have an effect on an estimated 23,000 “ultra-millionaire” and 160 billionaire households, or the high 0.1% of California households, Lee mentioned.

In Connecticut, progressive lawmakers are proposing extra conventional hikes: a better tax fee on capital positive aspects earnings for rich taxpayers and better private revenue tax charges for millionaires,

“We want to make sure that the wealthiest in our state really pay what they owe and never count on working households throughout our state to proceed to subsidize their share,” mentioned state Rep. Kate Farrar, a deputy majority chief in the Democrat-controlled House of Representatives.

One impediment to such proposals is that some states the place the concept could be widespread are at the moment operating price range surpluses, which means there’s little stress to boost income.

Connecticut is anticipated to finish its fiscal yr with a $3 billion surplus. Hawaii is projecting a price range surplus of $1.9 billion going into the new legislative session.

But Hawaii state Rep. Jeanne Kapela, a Democrat, mentioned a proposal there to extend the state’s capital positive aspects tax is extra about financial fairness than elevating cash.

“If you take a look at our tax code now, it’s actually the definition of financial inequality,” Kapela mentioned.

The lowest-paid employees in lots of states usually see a far larger proportion of their revenue go to pay taxes yearly than the very wealthy, significantly in states that don’t have a graduated revenue tax.

Voters in Massachusetts, which had a flat revenue tax, accredited an modification to the state structure in November that units a better fee for these incomes greater than $1 million a yr.

Despite optimism expressed by liberal lawmakers that 2023 may very well be the yr, many of those proposals face an uphill battle, even in blue states with Democratic governors.

“This ‘tax the wealthy’ has been round earlier than and it’s current once more. And fairly frankly, it by no means bought traction earlier than and I severely doubt there’s an urge for food for it now,” mentioned Gary Rose, professor of political science at Sacred Heart University in Fairfield, Connecticut.

Lots of people, he mentioned, don’t resent the wealthy as a lot as some progressive Democrats.

“I believe in case you polled the American individuals, lots of people wish to get wealthy themselves and it’s a part of, if you’ll, the American Dream,” Rose mentioned. “We’ve by no means actually had on this nation an incredible urge for food for taxing the wealthy as a result of getting wealthy … is actually a part of who we’re and what separates this nation from many Democratic socialist international locations.”

A wealth tax invoice in California by no means even bought a public listening to final yr. Gov. Gavin Newsom, a Democrat who was simply elected to a second time period in a landslide, has actively campaigned towards efforts to extend taxes on the wealthy.

His opposition helped sink a 2022 poll initiative that will have raised taxes on the wealthy to pay for electrical automobile charging stations and wildfire prevention.

In Connecticut, Democratic Gov. Ned Lamont, a multimillionaire, says he needs to focus his second time period on lowering taxes somewhat than elevating them.


Associated Press Writer Audrey McAvoy in Honolulu, Hawaii and Adam Beam in Sacramento, Calif. contributed to this report.