Supporters of taxes on the very rich argue that people are emerging from the COVID-19 pandemic with an increased appetite for what they call “tax justice.”
Bills announced Thursday in Minnesota, California, New York, Illinois, Hawaii, Maryland, Washington and Connecticut vary in their approaches to raising taxes, but all revolve around the idea that wealthier Americans should pay more. .
All proposals face questionable prospects. Similar legislation has died in state legislatures and Congress. But the new momentum shows that the political left is not ready to give up the populist argument that government can and should be used as a tool to redistribute wealth.
“Under the pandemic, as people struggled to put food on the table, we saw billionaires double their wealth,” said California Assemblyman Alex Lee, a Democrat.
The Tax Foundation, a conservative political organization, called estate taxes, which impose taxes not just on new income, but on a person’s total assets, as “economically destructive.”
He also said in a statement that such taxes create “perverse incentives” for the wealthy to avoid taxes, including simply moving to states with a lower tax burden.
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“Very few taxpayers would remit estate taxes, but many more would pay the price,” the group said in a statement. Progressive Democrats, however, argue that they are not seeing wealthy taxpayers leave their states because of higher taxes.
California already taxes the rich more than most states. The top 1 percent of wage earners account for about half of the state’s income tax collections. But this week, Lee proposed a “wealth tax,” similar to the one promoted for years by US Sen. Elizabeth Warren, D-Massachusetts.
It would impose a 1.5 percent annual tax on assets of more than $1 billion and 1 percent on assets of $50 million or more. The new tax on wealth, not annual income, would affect about 23,000 “ultra-millionaire” households and 160 billionaires, or the top 0.1 percent of California households, Lee said.
In Connecticut, progressive lawmakers are proposing more traditional increases: a higher capital gains tax rate for wealthy taxpayers and higher personal tax rates for millionaires.
“We need to make sure the wealthiest in our state actually pay what they owe and not expect our state’s working families to continue to subsidize their share,” said state Rep. Kate Farrar, deputy majority leader in the state-controlled House of Representatives. by the Democrats. Representatives.
One obstacle to such proposals is that some states where the idea could be popular currently run budget surpluses, meaning there is little pressure to increase revenue.
Connecticut is expected to end its fiscal year with a surplus of $3 billion. Hawaii projects a budget surplus of $1.9 billion for the new legislative session.
But Hawaii state Rep. Jeanne Kapela, a Democrat, said a proposal there to raise the state’s capital gains tax is more about economic equity than raising money.
“If you look at our tax code now, it’s really the definition of economic inequality,” Kapela said.
The lowest-paid workers in many states often see a much higher percentage of their income go to paying taxes each year than the very wealthy, particularly in states that do not have a graduated income tax.
Massachusetts voters, who had a flat income tax, approved an amendment to the state constitution in November that sets 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 around again. And frankly, it never got traction before and I seriously doubt there’s any interest in it now,” said Gary Rose, a professor of political science at Sacred Heart University in Fairfield, Connecticut.
Many people, he said, don’t resent the rich as much as some progressive Democrats.
“I think if you survey Americans, a lot of people want to get rich and it’s part, if you will, of the American Dream,” Rose said. “We’ve never really had a tremendous appetite in this country for taxing the rich because getting rich…is really part of who we are and what separates this country from a lot of democratic socialist countries.”
A California estate tax bill didn’t even make it to a public hearing last year. Governor Gavin Newsom, a Democrat who was just elected to a second term in a landslide, has actively campaigned against efforts to raise taxes on the wealthy.
His opposition helped scuttle a 2022 ballot initiative that would have increased taxes on the wealthy to pay for electric vehicle charging stations and forest fire prevention.
In Connecticut, Democratic Gov. Ned Lamont, a billionaire, says he wants to focus his second term on cutting taxes rather than raising them.