An Exit Tax and a Wealth Tax for Californians?

An activist is now attempting to obtain 694,354 signatures to place a wealth tax/California exit tax on the 2010 ballot. This initiative would:
– Impose a one-time tax of 55% on property exceeding $20 million of a California resident or held in California by nonresident;
– Imposes a tax of between 36.5% to 54.3% when a resident dies or leaves California;
– Imposes additional 17.5% tax on total incomes of taxpayers with income exceeding $150,000 if single, $250,000 if married;
– Imposes additional 35% tax if incomes exceed $350,000 if single, $500,000 if married;
– Requires State to acquire shares of specified corporations (i.e. GM, Ford, ExxonMobil, etc.) to influence environmental practices.

The initiative’s sponsor, one Paul McCauley, notes that, “This act proposes to restore a measure of balance in wealth between persons living in California, to salvage the global ecosystem from ongoing destruction and to restore public supervision and influence over the nation’s largest financial institutions.”

First, the proposed initiative is almost certainly unconstitutional as it restricts interstate commerce. Only the federal government can do that; an exit tax (taxing me if I move to, say, Nevada) obviously imposes a restriction on interstate commerce. Further, the initiative appears to me to violate California’s rules that an initiative can only cover one subject.

If somehow Mr. McCauley obtains the signatures needed to place this on the ballot—I’m hopeful that he’ll be unable to find 694,000 Californians who want to destroy the state’s economy—I can’t imagine this initiative passing.

What liberals should consider is that without industry there can be no government revenues. Instead of increasing tax rates California needs to drastically cut tax rates. I don’t see that happening yet that’s the real solution to our budget crisis. Frankly, should Mr. McCauley’s initiative get approved and be found constitutional (a very unlikely prospect), California would go bankrupt as any individual who has such high funds would leave the state (good luck to the FTB trying to collect such funds), venture capital would leave the state, and Arizona, Nevada, Oregon, and Colorado would find themselves with a lot more industry than they currently have.


Hat Tip: Tax Foundation Blog

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