Estate Tax Bill Will Do Nothing to Reduce California’s Wealth Gap

You would think that California’s current $21.4 billion budget surplus would be plenty of money to fund the spending wish list of those thwarted over the past 8 years by former Gov. Jerry Brown’s adherence to the principle of subsidiarity.

Think again.  In fact, much of the talk in Sacramento this year has been about ways to raise taxes, such as a new $140 million water tax, a $10.5 billion “split roll” property tax scheme, and a new tax on services that would be a $10 billion annual tax increase.

Now comes the latest tax hike proposal, a bill by Sen. Scott Weiner, D-San Francisco, to impose a new $1 billion a year California estate tax.  It would be at a lower rate of $3.5 million per individual than the current federal level of $11.4 million.

Weiner says his proposal is about reducing “wealth inequality” for children.  He wants to spend the money providing savings accounts to poor children – a form of universal basic income that I’ve written about on this blog in the past.  As PRI’s Damon Dunn notes, basic income does nothing to lift people economically, and actually keeps them stuck in poverty.

In his press statement – which is filled with class warfare rhetoric that would make Alexandria Ocasio-Cortez blush – he says, “as the federal government has slashed the estate tax for wealthy families, working class and low income families – particularly black and Latino families – have struggled . . .”

Rather than blaming the Trump tax cuts – perhaps he should ask how this is so in California.  After all, California has one of the most progressive tax schemes in the United States and the entire world.  The nonpartisan Tax Foundation estimated a few years ago that California had the nation’s second-most progressive tax code, and a tax code that was more progressive than even France!

Meanwhile, California’s top 1 percent accounted for nearly 46 percent of state income tax revenue, according to the most recent estimates.  Never mind the fact that most economists decry the over-reliance on taxes paid by the rich, which contributes to tax volatility and make California vulnerable to painful budget cuts in the next recession.

The real reason we have so much wealthy inequality here is because of the policies advocated by Weiner and his allies.

Big government energy policies, such as electric car subsidies, only benefit the wealthy.  Unrealistic renewable energy mandates drive up energy burdens and amount to state-legislated energy poverty in poor, rural, inland, and minority communities.

Lawmakers are going after Californians who work as independent contractors doing handiwork for Thumbtack or earn extra money driving for Uber and Lyft.  As Kerry Jackson recently wrote, work-hating California wants to stop freelance workers by forcing companies to hire them as employees.   This will result in fewer people being hired and many losing the opportunity to provide for their families.

They are also trying to shut down charter schools, which give parents and students in low-income parts of the state much needed school choice option.  Ironically, those who claim to care about kids in poor and minority communities want to keep them trapped in failing government schools that will keep them trapped in poverty.

If Sen. Weiner really wants to help poor children break out of poverty, he should start by repealing barriers to opportunity that he and his allies are pushing.  That means reforming state law to expand school choice, passing occupational licensing reform so the doors to good-paying aren’t shut thanks to expensive licensing requirements, and keep California’s tax burden competitive with other states to attract investment.

That would do far more to help children succeed than failed, socialist ideas and tired, class warfare rhetoric.

Tim Anaya is the Pacific Research Institute’s communications director.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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