Gov. Gavin Newsom Announces Objection to Wealth Tax Proposal

Gov. Gavin Newsom expressed his opposition to AB 259 Assemblyman Alex Lee (D-Silicon Valley), a wealth tax bill earlier this week confirming that the bill will ultimately not pass this year, even if it passes both the Assembly and the Senate.

While Newsom has supported tax increases in the past, he did not levy taxes on wealth or taxes imposed by the state based on an individual’s assets. One of Newsom’s biggest speeches against the wealth tax came in 2020 when he vehemently opposed AB 2088. Newsom said at the time that “wealth tax is not part of the conversation. Wealth tax proposals aren’t going anywhere in California.”

In 2022, Newsom again surprised many people by opposing Proposition 30, a ballot initiative that was supposed to raise taxes on wealthy Californians to fund wildfire fighting and encourage electric vehicles. Proposition 30 ultimately failed in November, with 58% to 42% of the vote.

Newsom continued his opposition to wealth taxes Wednesday with a statement from his office confirming that he will continue to oppose new wealth taxes, including AB 259. A 1 percent net worth tax on net worth over $50 million and an increase to $1 .5 percent on a net worth over $1.0 billion—compared to previous bills, the governor is still throwing down the gauntlet.

But why? Newsom’s constant struggle for wealth has raised eyebrows among many on the left, including the strange associations that have sprung up as a result. For example, opposition to Proposition 30 last year included the governor, the Republican Party of California, the California Teachers Union and the California Chamber of Commerce, among others. And this time with AB 259, Newsom finds himself on the opposite side of the unions.

One of the main reasons has been California’s large surplus in recent years. With such a large income, there really was no need for a wealth tax. Another reason was that Newsom focused on “the welfare and financial health of the entire state.” While such a phrase could mean anything, it boils down to the fact that 700,000 Californians have left the state since 2020. Combined with many businesses leaving, a large wealth tax will only exacerbate this outcome, leaving California to lose. even more than a wealth tax would bring. Newsom has said many times that he is worried about what such an increased outcome will lead to. Even with the state facing a $22 billion deficit, Newsom, like many other lawmakers, cannot justify imposing such a tax.

While there are some other wealth tax proposals, including a proposed constitutional amendment currently before the Assembly and a 2024 proposal slated for a vote, Newsom continues to be an odd ally among those who fights wealth taxes in California.

“It doesn’t take a genius to figure out why a wealth tax would be just awful for California,” John Lemkoe, a Bay Area welfare adviser who has had many clients who left the state in recent years, told the Globe. Friday. “Just talk to all those who earn more than 100 thousand dollars and leave. He is being squeezed. This is because they feel they are overpaying their fair share. It’s because they don’t like how their taxes are spent here. This is because they cannot develop their business here.:

“Many barely stay here, and I’ve heard from many that another big tax increase, or should I say another targeted tax increase, will be the last straw for them. It’s easy for some to yell “Tax the rich” but you know what? Too high taxes, they go away, and you have even less money than before. Now many people in California are aware of them. Republicans, some Democrats, of course, and Newsom of all people. You can hang a lot on Newsom. But even he knows that heavy taxes on wealthy Californians will only make matters worse.”

It is believed that AB 259 is unlikely to be adopted this year.