Proponents of taxes for the wealthy insist that people are emerging from the COVID-19 pandemic with a greater appetite for what they call “tax justice.”
Bills announced in California, New York, Illinois, Hawaii, Maryland, Minnesota, Washington and Connecticut differ in their approach to tax hikes, but all revolve around the idea that the richest Americans should pay more.
All proposals face questionable prospects. Similar legislation has died in state legislatures and Congress. But the new push shows that the political left is not ready to give up on the populist argument that government can and should be used as a tool to redistribute wealth.
“In a pandemic, when people are struggling to put food on the table, we’re seeing billionaires multiply their wealth,” said California Assemblyman Alex Lee, a Democrat.
The Tax Foundation, a conservative policy organization, called a wealth tax — which imposes a tax not just on new income, but on a person’s total assets — “damaging the economy.”
He also said in a statement that such taxes create a “perverse incentive” for the rich to avoid taxes, including simply moving to a country with a lower tax burden.
“Many taxpayers are paying the wealth tax – but many more are paying the price,” the group said in a statement. Progressive Democrats, however, say they don’t see wealthy taxpayers leaving their states because of higher taxes.
California already taxes the rich more than most states. The top 1% of earners account for roughly half of the country’s income tax collection. But this week, Lee proposed a “wealth tax,” similar to one promoted for years by U.S. Senator Elizabeth Warren, Democrat of Massachusetts.
It would 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, not annual income, would affect roughly 23,000 “ultra millionaires” and 160 billionaire households, or the top 0.1% of California households, Lee said.
In Connecticut, progressive lawmakers are proposing more traditional increases: higher tax rates on capital gains for wealthy taxpayers and higher personal income tax rates for millionaires,
“We need to make sure that the wealthiest in our country actually pay what they owe and not expect our country’s working families to continue to subsidize it,” said Rep. Kate Farrar, deputy majority leader in the House of Democrats. Representative.
One obstacle to these proposals is that some countries where the idea could be popular are currently running budget surpluses, meaning there is no pressure to raise revenue.
Connecticut is expected to end the fiscal year with a $3 billion surplus. Hawaii projects a $1.9 billion budget surplus into the new legislative session.
But Hawaii state Rep. Jeanne Kapela, a Democrat, said the proposal was to increase the state’s capital tax is more about economic efforts than raising money.
“If you look at the tax code today, it’s really the definition of economic inequality,” Kapela said.
The lowest-income workers in many countries often see a larger percentage of their income paid in taxes each year than the very rich, especially in countries that do not have graduated income taxes.
Voters in Massachusetts, which has a flat income tax, approved an amendment to the state constitution in November that set a higher rate for those who earn more than $1 million a year.
Despite the optimism expressed by liberal lawmakers that 2023 could be the year, many of these proposals face an uphill battle, even in blue states with Democratic governors.
“This ‘tax on the rich’ has been around before and it’s happening again. And frankly, it never caught on before and I doubt there’s any appetite for it now,” said Gary Rose, professor of political science at Sacred Heart University in Fairfield, Connecticut.
Many people, he said, don’t hate the rich as much as some progressive Democrats.
“I think if you poll Americans, a lot of people want to be rich themselves and that’s part of, if you want, the American Dream,” Rose said. “We’ve never had such an appetite in this country to tax the rich for being rich … it’s really part of who we are and what separates this country from a lot of Democratic socialist countries.”
California’s wealth tax bill never got a public hearing last year. Governor Gavin Newsom, a Democrat who was just elected for a second term in a landslide, has actively campaigned against efforts to increase taxes on the rich.
His opposition helped create a 2022 ballot initiative that would raise taxes on the wealthy to pay for electric vehicle charging stations and fire prevention.
In Connecticut, Democratic Governor Ned Lamont, a multimillionaire, said he wants to focus his second term on reducing taxes instead of raising them.
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