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States are increasingly turning to high-income and high-net-worth individuals as a source of new revenue, but what looks like a simple rate hike often carries far more complex consequences. In this episode, Brian Rebhun, PwC’s Financial Services Tax Leader, and Ben Muilenburg, PwC’s State and Local Tax Partner, break down the rising wave of millionaire taxes, billionaire surcharges, and wealth tax proposals in states like California, New York, Massachusetts, and Maryland, and explore why these measures may involve more than the headline rate change.
Listeners will hear how the three primary approaches — rate increases, surcharges, and wealth taxes — can each create distinct compliance considerations, including potential impacts on composite return eligibility, PTET benefits, and estimated payment obligations. Whether you're a high-net-worth individual, a pass-through business owner, or an advisor, this conversation offers perspectives on a trend that may continue to expand.
Key takeaways
- Millionaire and billionaire tax proposals appear to be increasing nationwide. California and New York have been active in this space, with Massachusetts, New Jersey, Minnesota, Washington, and Illinois have considered, advanced or enacted measures, suggesting a broader trend that may continue in upcoming legislative sessions.
- Not all proposals are structured the same way. States are exploring three distinct tools — rate increases, surcharges, and wealth taxes — each with different mechanics and considerations.
- Wealth taxes raise unique questions. Beyond rate or surcharge measures, wealth tax proposals can present implementation hurdles and valuation considerations such as how to value closely held businesses, trusts, and worldwide assets that may complicate adoption.
- Indirect impacts may be as noteworthy as the rate changes themselves. Surtaxes can affect composite return eligibility, PTET benefits, and estimated payment and withholding obligations.
Segmented topics with timestamps:
- 0:00 - Introduction: Why millionaire and wealth taxes are more than a rate hike
- 1:15 - The trend and the three approaches: Rate increases, surcharges, and wealth taxes
- 4:30 - State spotlights: California, New York, and Massachusetts
- 8:27 - Compliance considerations: Composite returns, PTET elections, and residual liabilities
- 10:58 - Other states to watch and planning considerations: Entity structuring and source income
- 15:12 - Key takeaways and closing thoughts
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State and Local Tax for Financial Services
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