American Consequences - September 2020

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 like Bonta to regulate. When laws change, people alter their economic behavior and investment strategies to reflect their best interest under the new rules. It’s called human nature. Bonta understands this reality on some level, or else he wouldn’t plan on harassing nonresidents for money once they’ve left California. Still, he largely believes that “the rich” will stay put to take it in the shorts rather than hightail it out and roll the dice in court when Bonta’s enforcers come knocking. The great escape, however, appears to be in the works... Dennis Brager, a Tinseltown tax attorney for the rich and famous, remarked that he’s “hearing from clients who would like advice on how to break ties with California in order to avoid paying what will amount to confiscatory taxes on their income and wealth.” Echoing those concerns was Mauricio Umansky of the real estate company The Agency, telling one news outlet that “there is certainly a lot of conversation about getting out of California because of how expensive it is, but really more about the taxes – the fear of the new California taxes as well as the fear of the new wealth tax.” Even the Los Angeles Times

you’re not letting them leave.” Cavuto then asked the California Democrat the obvious question of how this tax would be legally binding. A person living outside of California is no longer subject to its jurisdiction, is he? “We believe we can do that,” responded Bonta. “Certainly, we’re open to dialogue and discussion as we move the bill forward. But we think it’s a sound approach and has a strong legal foundation.” Jim Burling, who is with the Pacific Legal Foundation, disagrees. He tells American Consequences that, while California “may be able to tax wealth within the state just like it can tax real property within a state, there is no basis for taxing nonresidents for wealth not located in the state,” adding that any attempt by lawmakers to tax the wealth of nonresidents could “violate the dormant Commerce Clause [of the U.S. Constitution] – a doctrine that holds a state cannot adopt laws that hinder the free flow of commerce across borders.” As of right now, Burling says, there’s no case law on the constitutionality of a state wealth tax “because no state has yet been so craven as California to have adopted one.” Because California’s constitution “nowhere expressly refers to the proposal’s taxation of ‘worldwide wealth,’ there is a good argument that there is no state constitutional authority [to implement] such a tax.” UNINTENDED CONSEQUENCES A wealth tax may be legally dubious, but by pressing for one, progressives don’t fully

– no friend of free markets – dinged the wealth tax

American Consequences


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