A tax on the rich? Liberals push for state property tax again

NEW YORK. Proponents of taxing the very rich argue that people are emerging from the COVID-19 pandemic with a big appetite for what they call “tax justice.”

Bills announced Thursday in California, New York, Illinois, Hawaii, Maryland, Minnesota, Washington and Connecticut vary in their approach to raising taxes, but they all revolve around the idea that the richest Americans should pay more.

All proposals have dubious prospects. A similar law died in state legislatures and Congress. But the new push shows that the political left is not ready to abandon the populist argument that government can and should be used as a tool for redistributing wealth.

“During the pandemic, as people struggled to get food on the table, we saw billionaires double their wealth,” said California Assemblyman Alex Lee, a Democrat.

The Tax Foundation, a conservative political organization, called wealth taxes, which levy taxes not only on new income but on all of a person’s assets, “economically devastating.”

The statement also said such taxes create “perverse incentives” for the wealthy to avoid taxes, including simply moving to states with lower tax burdens.

“Very few taxpayers will remit wealth taxes, but many more are paying for it,” the group said in a statement. However, progressive Democrats say they don’t see wealthy taxpayers leaving their states for higher taxes.

California already taxes the rich more than most states. The top 1% of employees account for about half of the state’s income tax receipts. But this week, Lee proposed a “wealth tax” similar to the one promoted for years by US Senator Elizabeth Warren, a Democrat from Massachusetts.

It will impose an annual tax of 1.5% on assets over $1 billion and 1% on assets of $50 million or more. The new tax on wealth, rather than annual income, will affect an estimated 23,000 “ultra-millionaires” and 160 billionaires, or the top 0.1% of California’s households, Lee said.

In Connecticut, progressive lawmakers are proposing more traditional increases: higher capital gains tax rates for wealthy taxpayers and higher personal income tax rates for millionaires.

“We need to ensure that the richest in our state actually pay what they owe and don’t expect working families in our state to continue to subsidize their share,” said Rep. Kate Farrar, Deputy House Majority Leader. representatives controlled by the Democrats. Representatives.

One obstacle to such proposals is that some states where the idea may be popular are currently running budget surpluses, meaning there is no need to increase revenues.

Connecticut is expected to end the fiscal year with a $3 billion surplus. Hawaii is projecting a $1.9 billion budget surplus ahead of the new legislative session.

But Hawaii Rep. Jeanne Capela, a Democrat, said the proposal to increase the state’s capital gains tax is more about economic justice than raising money.

“If you look at our tax code now, you will see that this is really the definition of economic inequality,” Capela said.

The lowest paid workers in many states often see a much larger percentage of their income go to taxes each year than the very rich, especially in states that do not have a graduated income tax.

Voters in Massachusetts, where the income tax was flat, approved an amendment to the state constitution in November that would place a higher rate on those earning more than $1 million a year.

Despite the optimism expressed by liberal lawmakers that 2023 could be the year, many of these proposals face uphill battles even in blue states with Democratic governors.

“This ‘tax on the rich’ was there before, and it’s here again. And frankly, it’s never been popular before, and I seriously doubt there’s a demand for it now,” said Gary Rose, professor of political science at Sacred Heart University in Fairfield, Connecticut.

Many people don’t resent the rich as much as some progressive Democrats, he said.

“I think if you poll Americans, a lot of people want to get rich themselves, and that’s part, if you will, of the American Dream,” Rose said. “We never had a huge appetite in this country for taxing the rich, because getting rich … really is part of who we are and what sets this country apart from many democratic socialist countries.”

California’s wealth tax bill didn’t even go to public hearing last year. Gov. Gavin Newsom, a Democrat who was just elected to a second term in a landslide, has been vocally opposed to efforts to increase taxes on the rich.

His opposition helped defeat the 2022 election initiative, which was supposed to raise taxes on the wealthy to pay for electric car charging stations and prevent wildfires.

In Connecticut, Democratic Gov. Ned Lamont, a multimillionaire, says in his second term he wants to spend his second term cutting taxes rather than raising them.

Associated Press contributors Audrey McAvoy of Honolulu, Hawaii, and Adam Beam of Sacramento, California contributed to this report.