When CFT President Jeff Freitas spoke at the press conference with Alex Lee, he clearly explained why our statewide union is supporting the Wealth Tax, ““CFT is proud to support AB 259 and ACA 3,” said CFT President Jeff Freitas. “Billionaires and mega-millionaires should pay what they owe in taxes. Working families shouldn’t have to subsidize the ultra-rich so that our communities can have the schools, roads, and essential services they deserve.”
California is facing a $22.5 billion deficit and Governor Newsom’s proposed budget plan includes cuts to public health, transit, housing, and climate programs. So, despite some hopeful movement on climate with the Inflation Reduction Act nationally and a range of investment here in California, we risk moving backwards again on this and other essential needs unless we can find the revenue to address the gap in the budget.
Fortunately, Assemblymember Alex Lee has introduced a Wealth Tax bill like similar proposals made at the national level by Senators Bernie Sanders and Elizabeth Warren as well as tax increases on the wealthy briefly floated by President Biden. As the Los Angeles Times reported:
San Jose Assemblymember Alex Lee plans to introduce a bill that would impose new taxes on California’s “extremely wealthy,” at a rate of 1.5% on those worth more than $1 billion starting next year, and at 1% for those worth more than $50 million starting in 2026.
If passed, the tax would affect 0.1% of California households and would generate an additional $21.6 billion in state revenue, according to Lee.
The bill, which is co-sponsored by nine other lawmakers and supported by CFT, simply aims to get billionaires to pay their fair share, rather than evading it as is currently the case. Indeed, a Pro Publica study recently documented that the uber rich shell out a very small percentage of their wealth in taxes, little to nothing in income taxes, and pay a smaller percentage than most Americans. The $21.6 billion this measure brings in would virtually erase the state’s budget deficit and provide a more stable, ongoing source of revenue to the general fund to help deal with everything from the climate crisis to the epidemic of homelessness, not to mention protecting the funding of current state services.
Despite the chorus of claims to the contrary, a recent analysis by the California Policy Lab found “no evidence of a pronounced exodus from the state” due to increased taxes on the wealthy. In fact, the rich are doing just fine despite being pilloried on White Lotus and elsewhere.
To really see the big picture of American inequality, one needs to focus not just on the obscenely huge income gap but also on the even more significant wealth gap. As Robert Reich has pointed out, in the United States the wealth gap has exploded over the last few decades with the share of household wealth controlled by the richest 10% of Americans going from one third in the 1970s to 75% today. When one drills down a little deeper into the numbers, the level of inequality is even more dramatic, with the top one-tenth of one percent of Americans owning as much as the bottom 90% of the rest of us.
As the CFT notes, “The number of billionaires on Forbes’ 35th annual list of the world’s wealthiest has increased dramatically, with the number of billionaires increasing by over 30% last year, or a new billionaire roughly every 17 hours. Their collective wealth has increased by $5 trillion since last year, and the U.S. has the most number of billionaires, with over a quarter of U.S. billionaires coming from California.”
Thus, as prominent UC Berkeley economist Emmanuel Saez told the Los Angeles Times, a wealth tax would restore “tax justice.”
As is always the case, however, such an effort will be difficult, with a host of pundits already deriding Lee’s measure as dead on arrival without enough support to make it through the legislature. But, while that may be true in the short term, the idea of taxing billionaires is extremely popular with the voting public with close to 80% support. Perhaps that will help the legislature find the political courage to buck the robber barons of our new gilded age. If not, CFT should start looking for allies in labor and the community across the state to put it on the 2024 ballot without them.