California Democratic lawmakers seek to impose a new tax on "extreme wealth"

The legislative proposal proposes to tax 1.5% to anyone with a "worldwide net worth" of more than $1 billion.

A group of left-leaning California lawmakers is pushing a bill that seeks to make anyone with a "worldwide net worth" in excess of $1 billion pay an annual 1.5% tax.

The bill, which is spearheaded by Democrat Alex Lee, seeks to apply an additional tax to all those with more than $1 billion in assets. The tax rate will be 1% in 2024 and in 2026 it intends to charge an additional 1% to those who have more than $50 million dollars.

The project is unprecedented since it would be tax citizens on overall wealth, including the value of art, shares of private companies and financial assets abroad. 

The measure would raise more than $21 billion a year according to estimates by UC Berkeley economist Emmanuel Saez, who helped design the national wealth tax proposed by Massachusetts Senator Elizabeth Warren.

How would it affect the proposal?

People have already been fleeing California due to high taxes and this could end up scaring away the wealthiest.

According to James Doti, professor of economics at Chapman University. the 10 highest-tax states in the country lost nearly 1 in every 100 residents between July 2021 and July 2022, approximately the same number of people who moved to the 10 lowest-tax states.

Forbes also recently highlighted that there was a decrease of billionaires in California in 2022. High profile people preferred to move to other states such as Florida and Colorado, among others.

In addition to this, Jared Walczak, vice president of state projects at the Tax Foundation's State Tax Policy Center, pointed out that this tax rate could directly affect investment returns.

"'Average taxpayers may not care if the ultra-wealthy have lower net worths. But they will certainly care if innovation slows and investments decline," he said highlighting that this would affect the overall economy.