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AB 2289, Tax on Extreme Wealth Reintroduced in California

For immediate release:

Assemblymember Alex Lee (D-San José) has reintroduced the tax on extreme wealth in California. Similar to the Ultra-Millionaire Tax Act proposed by Senator Elizabeth Warren, this tax would apply to households with net worths of more than $50 million — the top 0.07% of Californians. 

A David Binder poll conducted in 2021 indicates that Californians overwhelmingly support a wealth tax — nearly 70% of California residents polled supported a wealth tax on Californians worth $30 million or more.

The number of billionaires on Forbes’ 35th annual list of the world’s wealthiest has increased dramatically, with the number of billionaires increasing by over 30% last year, or a new billionaire roughly every 17 hours. Their collective wealth has increased by $5 trillion since last year, and the U.S. has the most number of billionaires, with over a quarter of U.S. billionaires coming from California. 

The ProPublica analysis released last year revealed that the richest 25 Americans pay just a tiny fraction of their wealth in taxes, and some are able to pay little to nothing in income tax, with effective tax rates lower than the average American. By increasing their fortunes in assets such as stocks and property and then borrowing off those assets, they are able to avoid selling the assets and paying capital gains taxes.

Similarly, while the California income tax is successful at taxing most Californians, it is not very effective at taxing the ultra-wealthy. For example, the richest Californians like Mark Zuckerberg, Sergey Brin, or Larry Page, can avoid the California income tax as long as they do not sell their stocks. 

The proposed wealth tax would tax all wealth, whether this wealth has been realized as income or not. It is a constitutional amendment and will apply a 1% tax on extreme wealth of $50 million or more per household and 1.5% on wealth in excess of one billion dollars. The proposed plan will be a constitutional amendment because the California Constitution currently limits the tax rate to 0.4%. 

“While some say California is driving away higher income residents, the opposite is true – we’ve actually been losing lower and middle-income residents that are being priced out while continuing to gain higher-income residents,” said Assemblymember Alex Lee. “With a tax on the ultra-wealthy who pay a lower effective tax rate than the bottom 99%, we can invest in our schools, tackle homelessness, expand needed services, and much more.”

Income and wealth is more concentrated in California than in the US overall, and this concentration and inequality has been growing. The collective wealth of California billionaires has surged from $300 billion a decade ago to $706 billion in March 2019, and to $960 billion in January 2021. 

"California billionaires have increased their wealth astronomically since the beginning of the pandemic, while regular working families have struggled to pay their bills,” said California Federation of Teachers (CFT) President Jeffrey Freitas. “We are proud to sponsor AB 2289 because it will provide the ability to fix our water, wildfire, education, and housing problems. It’s time we took care of each other, and not just watch billionaires fly into space."

The top 0.07% of the richest families or about 15,000 households would be affected by the tax, while raising estimated revenues of about $22.3 billion per year. The tax would be delayed to January 2025 for implementation and the billionaire tax would be applied in 2023.

The bill is co-authored by Assemblymembers Wendy Carrillo (D-Los Angeles), Ash Kalra (D-San José), Luz Rivas (D-San Fernando Valley), and Mark Stone (D-Monterey Bay).

“The ultra-rich have taken advantage of a tax system that allows them to profit from working-class Californians, a gross inequity that was exacerbated by the pandemic,” said Assemblywoman Luz Rivas (D-San Fernando Valley). “It’s been reported that the wealthiest Americans may be avoiding $163 billion in income taxes every year, according to a report from the U.S. Department of the Treasury. It is time the top-earning millionaires and billionaires pay their fair share in taxes to keep our government services funded for the very people they profit from. This is not a hypothetical conversation, on the federal level alone Jeff Bezos and Elon Musk paid absolutely no taxes. I am proud to work with Assemblymember Lee on this legislation so that California’s wealthiest class no longer takes advantage of the state’s tax codes.”

“Over the pandemic, ultra-wealthy individuals accumulated record-breaking amounts of wealth while numerous Californians struggled to get by in tumultuous economic conditions,” said Dale Walker, a member of the Patriotic Millionaires. “The growing gap between the haves and the have-nots has restricted the once achievable California Dream to a select few. If we want to realign our state with our core values, then the ultra-wealthy must pay more.”

If the proposal is approved by the legislature, voters will decide in 2022.