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January 18, 2023 at 11:33 AM
What You Need to Know
- Lawmakers in states including New York and California are planning a coordinated push.
- Proposals include taxing unrealized capital gains and expanding estate taxes.
- Wealth taxes could be impractical to implement and would push wealthy taxpayers out of state, political analysts say.
Lawmakers in seven states plan to introduce bills Thursday to tax wealthy individuals where they live, in lieu of a federal wealth tax, according to The Washington Post.
“Progressive activists know there’s absolutely no chance that Congress could pass a ‘wealth’ tax, so they are moving to Plan B — a coordinated effort to introduce legislation later this week in seven wealthy states to impose higher taxes on the rich,” Greg Valliere, chief U.S. strategist of AGF Investments, said Wednesday morning in commenting on the Post article in his Capitol Insights newsletter.
According to the Post, legislators in California, Connecticut, Hawaii, Illinois, Maryland, New York and Washington state will release bills “with the same goal of raising taxes on the rich.”
As Valliere notes, in addition to higher taxes on income and capital gains, “the activists are determined to enact a ‘wealth’ tax that would force rich taxpayers to pay taxes annually on assets that they own, rather than just their income that year.”
This idea, pushed by Sen. Elizabeth Warren, D-Mass., “has gone nowhere in Congress,” Valliere said.
Some of the state bills, according to the Post, resemble Warren’s wealth tax.
Anticipated proposals, according to the Post, include:
- Four states will float versions of a tax on unrealize capital gains — so-called “mark-to-market” taxes.
- Maryland lawmakers will propose an extra 1% tax on top of the state income tax rate on certain capital gains;
- Bills in Hawaii, Maryland and New York will propose lowering the estate tax exemption, “a measure that would affect more significantly a middle tier of rich people, not just the ultrarich”;
- Democrats in Connecticut, Hawaii, Maryland and New York hope to close what they say is a disparity in the highest earners paying a 20% tax on capital gains while paying a 37% tax on wages.
The wealth tax proposal “failed to get a majority of Democrat support at the federal level” for several reasons, according to Jeff Bush of The Washington Update. “First of all, the complexity of assessing the value of assets annually. Secondly, taxing one’s assets vs. income (earned or passive) doesn’t pass the smell test for most.”
