On Wednesday, with a $68 billion budget shortfall looming over the state Capitol, Gov. Gavin Newsom will meet a deadline to deliver his annual budget proposal, and, ominously, the Assembly Revenue and Taxation Committee will hold a hearing on two bills that could ultimately lead to sharply higher taxes for homeowners or retirees.
The committee chaired by Ventura County Democrat Jacqui Irwin will hear Assembly Bill 259, a wealth tax, and AB 362, a requirement to study the “efficacy” of replacing Proposition 13 with a “land value tax.”
Both bills were authored by San Jose Democrat Alex Lee, a hard-left progressive lawmaker. Both bills had failed to move in the legislature until now.
Barely a month after Lee introduced AB 259 in January 2023, Newsom announced his opposition to the bill, which would place a 1% tax on “worldwide net worth” of more than $50 million, and an additional .5% on net worth above $1 billion. When Lee introduced a similar proposal, AB 2088 in 2020, Newsom said, “A wealth tax is not part of the conversation. Wealth taxes are going nowhere in California.” We’ll see if that’s still true.
AB 259 would take effect only if the state constitution were changed to allow a wealth tax, and the proposed amendment has already been introduced as Assembly Constitutional Amendment 3. It would empower the Legislature to define wealth and tax it at a rate lawmakers would determine.
Although SB 259 specifies that the wealth tax would apply only to the super-rich, ACA 3 contains no such restriction. If approved by voters, it would allow the Legislature to write a new law that taxes the value of individual retirement accounts, appreciated assets such as real estate and stocks, and anything else lawmakers define as “wealth.”
As real estate values are pushed up by inflation, struggling California homeowners may discover that politicians in Sacramento think they’re “millionaires.” Try paying the electric bill with that “wealth.”
Lee’s second bill, AB 362, requires a study of replacing the current property tax assessment system under Prop. 13 with a tax based on the value of land if something else was built on it. Taxpayers should be on their guard against these schemes to invent new ways to get into their pockets.
