If you weren’t deterred by the smog, the smug, the politics, the protests, the high cost of living, or the taxes, maybe the coming wealth tax will be enough to drive you out of The Golden State.
To be clear, the proposed wealth tax in California doesn’t apply unless you have gobs of assets. You have to be holding assets, excluding directly held real estate, exceeding $30 million if you file as single or join, and $15 million for married filing separately. The tax rate is 0.4% every year.
Keep in mind, this is in addition to the proposed millionaire’s tax, that would add surcharges of 1% to incomes (joint or single) between roughly $1 million and $2 million, 3% on income between $2 million and $5 million, and 3.5% on income greater than $5 million. The added taxes would push the top income tax rate up from 13.3%, the highest in the nation already, to 16.8%.
If you’re one of the lucky, or unlucky, people subject to the wealth tax, you would have to report all of your assets, including stock in publicly and privately traded corporations; interests in partnerships, private equity or hedge funds; cash, bonds and savings accounts; mutual funds, futures and options; art and collectibles; offshore financial assets, pension funds, non-mortgage debt, real property and mortgage debt, to the Franchise Tax Board
Given the high bar, the tax would only hit about 30,000 Californians each year, or at least, that’s the initial plan. People with that amount of money can choose to live most anywhere. If the tax goes through and succeeds in driving the targeted taxpayers out of the state instead of raising revenue, then the state legislators will have to do something else, like lower the threshold on who has to pay the tax.
In case you’re wondering if the state legislators are crazy, they do have a plan. They’re hoping for a repeal of the limits on state and local tax (SALT) deductions on federal taxes that were part of the 2017 tax reform. If the next Congress repeals the $10,000 annual limit, then Californians, like New Yorkers and everyone else in high tax states, can once again offset their state taxes paid against their federal taxes owed. This moves the state tax from the residents of that state to the entire nation.