Welcome to Hotel California: Lawmakers Move to Tax People Who Have Left the State

California lawmakers appear intent on making the Eagles song Hotel California a reality … at least when it comes to taxes for those who try to flee the state. At the Hotel California, “you can check-out any time you like, but you can never leave!” With soaring costs and a massive $24 billion deficit, the state is also facing an exodus of people leaving the state. The solution? Convert the state into a tax Venus flytrap: not only impose a wealth tax on those caught in the state but tax those who try to leave.

The new bill introduced by Democratic Assemblyman Alex Lee would impose an extra annual 1.5% tax on those with a “worldwide net worth” above $1 billion, starting as early as January 2024.

The law has a cynical bait-and-switch provision. The billionaire tax is just meant for the initial packaging and passage. It can therefore be sold as a “billionaire’s tax.” However, in two years, the threshold drops to a worldwide net worth exceeding $50 million. While billionaires would stay at 1.5%, those in the lower tax bracket would be hit by a 1% added rate on worldwide assets.

It also includes the taxation on those who left the state . . . many due to the high taxes. California already has the highest tax burden in the nation. It relies on its top 1% of taxpayers for roughly half of its individual income tax revenue, but continually treats those taxpayers like game in a canned hunt. The result, not surprisingly, is that they are leaving for states like Texas and Florida.

The new tax would arrange for payments to California’s Franchise Tax Board for years after a departure for those assets which are not easily converted into cash.

I have previously written how the wealth tax pushed by Democrats like Sen. Elizabeth Warren are unconstitutional under the federal Constitution. States are not subject to the same limit. Not surprisingly, the highest taxing states are pursuing the most wealthy . . . who are leaving in droves. That includes Connecticut, Hawaii, Illinois, Maryland, Minnesota, New York and Washington.

What is most striking under the proposed law is that it will not only spur more wealthy couples to leave the state but discourage any from moving into the state. Even if this ill-considered law does not pass, who wants to risk going to a state that is actively pursuing new ways to tax you even if you ever decide to leave? With many in the top one percent getting out of the state, the tax demand on the most wealthy is only likely to increase with the dwindling numbers in the top tax brackets. No one wants to be the last buffalo on the plains for the California tax collectors.

Under the existing exit tax, businesses and individuals must pay a one-time tax to leave based on the value of the business or individual’s assets, including property, stocks, and other investments. For those who have earned more than $30 million, you can continue to pay for years after fleeing the state. The current exit tax is 0.4% of an individuals’ net worth over $30,000,000 in a tax year, including assets located outside of California other than real estate.

Taxing wealth is no easy matter so the proposal seeks $660 million per year for administrative costs.

California is also considering constitutional amendments and referendums to increase taxes for the most wealthy.

Last thing I remember, I wasRunning for the doorI had to find the passage backTo the place I was before“Relax, ” said the night man“We are programmed to receiveYou can check out any time you likeBut you can never leave”

147 thoughts on “Welcome to Hotel California: Lawmakers Move to Tax People Who Have Left the State”

  1. Years ago California tried to tax state pensions of fleeing workers. The courts overruled them.
    Newsom is speaking to the ignorant voters who think this is going to happen. It won’t because it can’t. It’s all about keeping his name out there.

  2. Someone please cite me the portion of the bill that establishes an intent to tax someone *after* they have moved out of State. I can’t find it.

  3. How “Retroactive” is the laws time frame?
    e.g.: You left California: 1-yr ago, 2-yrs ago, 5-yrs ago, 10-yrs ago, ???

    Does the Law contravene/conflict the Laws against Perpetuity?

    In the long run I can see Newsom & Co. applying this to CalPERS Retirees that have left the State (as good many do).

  4. Do these “advantaged” people sit around dinner at the French Laundry puffing up their chests, telling themselves (as John Kerry did) how special they are to come up with these “brilliant (lol) ideas?” There are people who watch every penny so that they stay just below a certain level because they lose “government handouts” (entitlements are different from handouts)–$1 over can change their tax bracket and shove them down deeper. Congress wrote tax laws with the loopholes to protect their derrieres. It didn’t occur to them that everyone would use those same tax laws to their advantage. (IMHO) We need a flat tax or a federal sales tax (then everyone pays according to their own spending) and get rid of income tax.

  5. Jonathan: I am not surprised that some on this blog (e.g., “Jamie”, “Edwardmahl”, “S.Meyer”) take umbrage to my comment about billionaires like Rupert Murdock. It’s a strange paradox. People in the middle class typically identify with the wealthy. They love to see photos of billionaire homes, the fancy cars and the other benefits that come from such wealth. These admirers of the wealthy life style actually believe they will one day enjoy the same. They imagine that one day they will be among the 1% that controls roughly 40% of US net worth. The reality is quite different. The vast majority in the middle class have limited or no class mobility. If you’re in the middle class that’s probably where you will stay. They will never enjoy the benefits of the Murdocks and Trumps of this world.

    What is more bizarre is that those who identify with the billionaire class actually attack any proposal for a “wealth tax”, calling the backers guilty of “class envy”. It’s a pejorative used to describe anyone who questions the super-stratified class divisions in the US. Sen. Warren is the biggest proponent of a “wealth tax”. Her net worth is about $67 million. No one can accuse her of “class envy”.

    Despite all the hype against the wealth tax proposal in California, a 1.4% tax is unlikely to materially affect the bottom line of Rupert Murdock or his son Lacklan. I doubt they will be selling their huge mansions and winery in Bel Air any time soon. But the talking heads in the middle class think a wealth tax on the Murdocks is an attack on them. That’s what Murdock is pushing on Fox News and the NY Post. Trying to get his working and middle class viewers and readers to actually believe a tax on him is going to affect them. It’s a scam but some on the blog actually believe it! That’s the paradox.

    1. Dennis, it is evident that your education provided you with an unlimited amount of nonsense where you chose to gorge yourself on things other than logic and reasoning. Today you are left in a sad state, only able to parrot those things provided by the left whether or not you understand them.

      You have no idea why what you promote destroys the things you say you wish to protect.

      1. S. Meyer: Don’t you have anything better to do than take pot shots at me? You are clearly not a billionaire. Otherwise you not be on this blog. But tell me about my “sad state” and who are those on the “left” I “parrot” and do “not understand”. Don’t recall mentioning anyone like that in my previous comment–unless you are referring to Sen. Warren, but she is a “liberal”. You know your problem? You, unlike me, have never expressed an original thought on this blog. It’s all regurgitated gibberish you see on Fox or similar media. None of your comments have any “logic or reasoning”.

        And I was wondering. Why do you apparently identify with Rupert Murdock? You probably don’t have large mansions in Bel Air or any others around the world. You don’t have loads of tax attorneys and accountants to help you avoid taxes. You don’t share the same exclusive club memberships. Have you ever been invited to one of Murdock’s exclusive dinner parties? There is nothing you and Murdock share in common. You don’t have the same class interests. So why would you agree with him in opposing the California wealth tax? I think it’s because Prof. Turley and Murdock, who act in tandem, have convinced you that you are one of them–that you all share the same interests. You don’t and you never will. But all that has been lost on you.

        You have been a sucker all your life–believing that if you support the interests of the wealthy their largess will somehow trickle down to you. You are like the gamblers in the casinos or those that put money out from their weekly paychecks to invest in the lottery. They all think that if they keep betting the “odds” will favor them. What they don’t understand is that the mathematical laws of probability make that impossible. In your case the laws of economics that make it virtually impossible for you to rise above your economic status. You are stuck in the middle with little likelihood, to use a gambling metaphor, of throwing a winning “7”. PT Barnum was right. “A sucker is born every day” And Murdock, through his propaganda outlets, is counting on you to be one of those suckers. So far you have not disappointed him!

        1. .”S. Meyer: Don’t you have anything better to do than take pot shots at me?”

          I wonder, based on your sad state of affairs, if you remember what you said” “I am not surprised that some on this blog (e.g., “Jamie”, “Edwardmahl”, “S.Meyer”) take umbrage to my comment about billionaires like Rupert Murdock.”

          Did you notice? You called out my name. You are right. I am not a billionaire, but how does that matter? Billionaires don’t spend billions on their lifestyles. They invest it in our economy and help increase the nation’s wealth. Do you think that is a crime? By the way, you can go into a library (possibly funded by a billionaire, remember Carnegie?) and take a book out for free. Pick the subject of economics, for it is obvious you know nothing about it.

          Your iPhone or Android today exceeds the ability of the phone any billionaire carried just a short while ago. Would you prefer his old phone or your present one? Can you tell me how many families would be better off if Steve Jobs were poor and we had fewer jobs and no iPhones?

          No, I don’t have the money to give ten million dollars to a hospital or a library, but I can be treated in that hospital and read books at the library. Are you jealous that the billionaire had his picture taken at the ribbon cutting? I am happy to see people getting treated or educated at those facilities. Why aren’t you just as happy, instead of whining that someone has more money than you? Skip the billionaires and worry about why so many on this blog are better off than you. Instead of worrying and whining, they worked hard.

    1. They will sue you therefore imposing lawyer fees on you.

      By having ever filed California income tax you make yourself a target.

      1. Our Federal Government regulates all interstate commerce. Internal affairs of any state are therefore subject to Federal not State control. To attempt to tax anyone not residing is a matter of jurisdiction. California is one of those states. It is not a sovereign nation in and of itself. To tax any citizen outside the boundaries of the state itself attempts to over ride the jurisdictions of the other states.
        Now the states do have jurisdiction over cities and counties within their state. Most of this is spelled out in something called the Interstate Commerce Act.This act has been around for a good number of years.
        So what happens IF and WHEN the Federal Government sues the State of California for over reaching its jurisdiction?
        Last I heard, the Feds have unlimited funds to do so.
        The key here may be whether or not individuals own property within the state itself. So once someone sells that property the state no longer has any control over what happens next.
        Any federal court will make that very clear to the individual states.
        Giving any state jurisdiction over other state’s citizens? That is a can of worms no one needs to open.

  6. During the dust bowl they were moving in. Now during the distrust bowl. There moving out. Those who are moving out must have this question in mind. What’s to keep Californica from raising the taxes even higher? It’s simply a matter of protecting your wallet from the thief.

  7. Makes perfect sense for CA, where so much wealth created in the state is tied up in shares vested or granted while working in CA but not sold until the grantee later moves to a zero tax state.
    Private bankers make a fortune structuring long-dates options overlays that negate or reduce market risk on these shares so that they can be held onto for optimal tax timing.
    Very similar to the US policy of applying a one-off exit tax on unrealized gains to those moving overseas and giving up their US citizenship. I think the “exit tax” strategy is a much better approach than an annual wealth tax and allows the state to capture income/value earned whilst working there.

    1. ” I think the “exit tax” strategy is a much better approach than an annual wealth tax”

      Neither is good, but if I had a preference, I would choose the ‘exit tax’ strategy as it isn’t legal if the person and his property are entirely removed from California. That would be the equivalent of no tax.

      1. these are new proposed laws where (in CA) you might have to report your assets annually and be assessed cap gains tax at some point between the entry price in CA and the assessed value when you exit the state.

        As everyone who read the article knows, these laws do not exist yet and do not apply now.

        Seems like a good way for the wealth creating (as opposed to wealth preserving) states to get a slice of the value accreted to state residents.

        Now some of these wealthy residents merely move out before cashing in.

        1. California can pass all sorts of rules and regulations even if unconstitutional, but once the person and his belongings are out of state, I don’t see how California will be able to enforce them. California is causing a billionaire drain from the state.

    2. How can this work? Legal theory?

      Hypothetical couple w/ net worth of $1 Bln leave CA and establish new residence in TX. They sell all their assets in CA before leaving (RE, State of CA bonds, etc.). How does State of CA assert right to tax common stock or options of a US registered public company for someone who is not resident in the state of CA?

      What’s the legal hook for taxing everyone in the US theoretically???

      What’s CA mechanism of enforcement for people who are non residents with no CA domiciled assets?

      They’re really going crazycakes…

      1. Have you herd of the CCP setting up clandestine secret police stations in New York City?
        California will just set up Cop shops in Dallas , Houston and Austin to harass the people of Texas.
        Good luck California! /s.

  8. Were California to attempt to subject me to tax after I had left the state I would simply laugh at them .

  9. It’s impossible to feel sorry for rich virtue-signalers who brought this upon themselves by consistently voting for a Democrat Party more than willing to abuse them.

    1. No way they they actually pay. This will eventually be about scrapping more wealth from the middle class. The rich will have tax accountants and lawyers.

  10. California is my families home state but we moved to the east coast in 96 due to business. Both me and my wife still have family left in the state but many have moved out. My sons were minors and did not graduate HS until 2004 and 2005. If California tries this how far back will they go? We know from the original US Amendment on Income Tax it was proposed only to go after the rich but that changed quickly and likely California will also. I doubt this is legal that one state can tax in another and in the past..

    1. In the deepest Baritone voice, Star Wars: “We have you Now!!!!

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