American Consequences - September 2020

A wealth tax may be legally dubious, but by pressing for one, progressives don’t fully grasp how economies work. Economies are not static like a math equation... Rather, they are dynamic, representing billions of daily interactions that are impossible for control freaks. would be willing to pay at a particular point in time, and a tax auditor would not have a crystal ball to make such a determination. Moreover, Kline says, high-income households socked with the wealth tax would end up spending “an outrageous amount of time and resources trying to estimate the value of their assets every year – with the additional risk of audits and penalties if the state disagrees with their estimates.” To be fair, Bonta does leave room in his bill for taxpayers to appeal the state’s arbitrary assessment. Just don’t get your hopes up... “The burden shall be on the petitioning determine the value of personal possessions could be problematic, as David Kline of the California Taxpayers Association tells American Consequences ... The Franchise Tax Board would have an impossible task – attempting to accurately value assets whose values could not possibly be known unless they were offered for sale in an open market. The value of a work of art, for example, depends on what a buyer

party” to demonstrate that the methodology was “unfair.” Also be prepared for the Franchise Tax Board’s attempt to nullify a legal sale if it happened to decrease a person’s overall net worth. “Any transaction, a primary purpose of which is to reduce the valuation of a taxpayer’s worldwide net worth as of December 31, shall be disregarded.” Apparently, that’s considered “evasion.” ‘HOTEL CALIFORNIA’ Yet as I mentioned earlier, these clauses aren’t even the most disturbing parts of the bill. That award goes to the section that targets those who are no longer California residents. If passed, the wealth tax would hit affluent individuals who have lived in California over the last 10 years . “Avoidance,” asserts Bonta, “is not as simple as moving to another state. “We have a phased-in approach, whereby, if you move, in year one, 90% of the tax bill still applies to you. In year two, 80%, and so on, for ten years until it phases out.” “Their wealth was accumulated during their time in California, during the nexus that they had with the state of California, and that is what we are proposing in our bill.” I’m reminded of the lyrics from that famous Eagles song, “Hotel California” ... You can check out anytime you like, but you can never leave . This obvious overreach flummoxed Fox Business host Neil Cavuto, who seems to agree with my Eagles reference... “It sounds like they would be prisoners of California...


September 2020

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