A bill proposed August 13 in the California Assembly would impose a new tax on high net worth individuals in the form of a wealth tax. (“Wealth Tax Act,” Bonita, AB 2088) The bill would impose a 0.4% tax on residents with a worldwide net worth in excess of $30,000,000 ($15,000,000 for a married taxpayer filing separately). The proposed tax would apply to residents, part-year residents, and “temporary residents” that are in the state for more than 60 days during the calendar year. The wealth tax also has an apportionment methodology that applies a 10-year lookback period to former residents who had been subject to the wealth tax in any of the preceding 10 years.
The legislative session ends on August 31, 2020, so this bill will face significant challenges to progress in the legislature, especially in light of the 2/3s vote needed for enactment. Taxpayers should be aware, however, that the state was facing a deficit that was projected to exceed $54 billion and it is likely that revenue raising measures will be proposed in the next legislative session.
Since the legislative session ends August 31, 2020, this tax likely faces significant hurdles to pass in 2020. Regardless, the push for a wealth tax in California is likely to continue into next year and beyond. Members of the Governor’s Task Force on Business and Jobs Recovery who are friendly to the public employee unions have called for enactment of a wealth tax among other tax increases to help with the budgetary deficit created by the current pandemic.
Partner, PwC US