California’s billionaires are increasingly worried about a proposed wealth tax that could impact smaller assets. According to a tax advisor for several billionaires, concerns over potential tweaks to the tax laws are prompting some of them to consider evading taxes.
This proposed 5% wealth tax recently made it onto the November ballot. David L’Esperance, the tax advisor, noted that California’s affluent individuals are uneasy about this tax proposal, which has drawn backing from influential groups such as SEIU and the Western Federation of Health Care Workers Unions, alongside figures like Vermont Senator Bernie Sanders.
L’Esperance elaborated, sharing that he often receives calls from clients questioning whether the new tax might be a long-term issue. The billionaire tax secured over a million verified signatures to qualify for the ballot, as confirmed by the secretary of state this week. In response, Governor Gavin Newsom is attempting to negotiate a complete repeal with advocates.
On Thursday, supporters of the tax suggested lowering it to 2% in an open letter. However, Newsom has expressed that he will not agree to a compromise.
Interestingly, L’Esperance referenced remarks from Emmanuel Saez, a professor at UC Berkeley and co-author of the tax proposal. Saez mentioned during a debate that this wealth tax on total assets likely won’t be a one-off situation. He noted that billionaires wouldn’t be caught off guard repetitively by new taxes.
The California Business Roundtable has pointed out in an earlier memo that there’s potential for the state legislature to adjust the millionaire tax to include middle-class households. In contrast, SEIU United Health Care Workers West strongly rejected this idea, insisting that any amendments would not change the fundamental purpose of the law.
L’Esperance emphasized that any expectations of a one-time tax are misplaced, implying that decreasing the threshold is definitely possible. He noted that state leaders can read public sentiment just like anyone else, pointing out that support for the tax is high, as evidenced by a recent Public Policy Institute of California poll where 54% of likely voters approved of the tax.
Many of L’Esperance’s clients possess substantial wealth but fall short of the billion-dollar mark. He also expressed concern over similar federal proposals, such as Senator Elizabeth Warren’s suggestion for a 2% annual tax on households earning over $50 million.
Moreover, L’Esperance believes the wide interpretation of the billionaire tax by the Franchise Tax Board could lead to situations where high-profile individuals like Mark Zuckerberg might face significant tax bills based on the valuation of their companies. He posed the question: “Does Zuckerberg really need to stay in California?”
He also mentioned that states like Nevada, Texas, and Florida are attractive to wealthy individuals seeking tax-friendly destinations. Incline Village, near the Nevada border, has become particularly popular among billionaires like Sergey Brin and SpaceX investor Steve Jurvetson, who have invested in properties there.
California state leaders have roughly a week to negotiate terms for this tax proposal and to reach an agreement with SEIU-UHW, which represents a large number of healthcare workers and consumers across the state.
