Welcome to the hotel California Such a lovely place Such a lovely face You can checkout any time you like, But you can never leave!
Posted on 08/27/2008 1:33:29 PM PDT by John Jorsett
Earlier this month, a California activist began gathering signatures to put a state wealth tax on the ballot. The measure would impose a new 35% income surtax (in addition to federal taxes and the existing 10.3% top state rate), and penalize people who leave the state by seizing 55% of assets exceeding $20 million. The money raised would be used to eliminate the state's budget deficit and for purchasing controlling shares in large corporations.
The 17.5% surtax is unusual because it would be on a taxpayer's total (not marginal) income whenever it exceeds $250,000, with another additional 17.5 percent tax on total income (for a total additional 35 percent tax) whenever it exceeds $500,000. In the case of single taxpayers or taxpayers filing as head of household, these additional taxes would be levied on incomes greater than $150,000 and $350,000 respectively.
So say someone has adjusted gross income of $1,000,000 and taxable income of $750,000. Today, their tax bill would be:
|
Federal Income Tax (35% top rate): |
$241,574 |
|
State Income Tax (9.3% top rate): |
$67,555 |
|
Payroll Taxes: |
$41,648 |
|
Total Income and Payroll Taxes: |
$350,777 |
|
Effective Tax Rate: |
35% |
With the new surtaxes, it would look like this:
|
Federal Income Tax (35% top rate): |
$241,574 |
|
State Income Tax (9.3% top rate): |
$67,555 |
|
Proposed Initiative Surtax (35%): |
$262,500 |
|
Payroll Taxes: |
$41,648 |
|
Total Income and Payroll Taxes: |
$613,278 |
|
Effective Tax Rate: |
61% |
The same person faces an effective tax rate of just 28% if they lived in neighboring Nevada. Being able to cut your taxes in half by moving to the next state over is probably not an incentive California wants to offer. Staying would also mean your tax bill going up by over 74 percent. Marginal rates this high would undoubtedly curtail capital formation, productive investment, and economic activity.
The initiative's sponsors have an answer to this too: hit people leaving with a hefty exit toll. The creatively named "Hasta La Vista Tax" of 36.8 percent is imposed when an individual dies or moves out of California. This exit tax would be on both recognized income and unrealized appreciation in asset values over $5 million. Since this tax inhibits commerce and burdens the right to travel, it is probably unconstitutional.
In addition, existing California residents who stay are hit with a one-time tax of 55 percent on assets in excess of $20 million.
Such enormous wealth and income taxes would probably be the best news Arizona and Nevada could get, because the exodus of capital and entrepreneurship will probably head their way.
The sponsor has until January 2, 2009 to gather the 694,354 signatures needed to place the initiative before California voters.
Wasn’t there an episode of “The Simpsons” where the town of Springfield levied a leaving town tax on a film production company? Of course, this would be MORE cartoonish than any episod of The Simpsons....
Add another 12% to those rates if Obama gets his wish to subject all income to FICA tax. Not to mention the increase he wants on the federal income tax. Plus whatever increase California’s Democratic legislature gets to California’s income tax.
When Mexifornia defaults and enters bankruptcy, I sincerely hope the federal government refuses to help them out.
They made their bed; now let them lie in it.
Scary and sad that anyone could be so selfishly demented. But this wouldn’t pass Constitutional muster as there is a recognized “Constitutional right to travel.”
Unless, of course, Marxist President Obama would pack the Courts with Ayers/Dohrn types.
Scary indeed.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
This sounds like it’s modeled on the bill that taxes people trying to leave the USA for another country to get around the taxes.
Rich people started doing that decades ago, moving to tax havens in the Caribbean.
SSI is chump change compared to saving a large percentage of your real earned and investment income, especially capital gains.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
Will they tax all the money that is wired back to mexico from illeagals?
That ALONE would pay all of Kali-fornias bills!
Isn’t ironic that this will hit the Hollywood types pretty hard with their expensive real estate that will become instantly worth less if just the petition is successful. The exit will start hard. What fool will wait for the vote?
The looters just won’t learn that their plan cannot work in the long run. All producers either switch sides or flee. Soon no wealth is left to loot. Then the looters have to do each others laundry in hope of surviving.
Since Reagan the best thing to come out of California is I-10 West.
Do it. Drive people out. Become the Sweden, circa 1975, of the Western Hemisphere. Turn yourself into the Third World dump, complete with a huge, uneducated, hostile underclass and capital flight, that you deserve.
I will meet with Bobby Jindal (Gov of Louisiana) and propose that if such were to pass that we extend to all fromer California tax-payers hit with such a surcharge that they be exemptied for 5 years from all state taxes. No socialists or communists need apply.
Wilson left them with a urplus, right?
Welcome to the hotel California Such a lovely place Such a lovely face You can checkout any time you like, But you can never leave!
Ping
Napa Valley wines will go up in value as imports.
The rest of the country will once again get to be a part of the nightly news.
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