U.S. markets closed
  • S&P 500

    -75.65 (-1.46%)
  • Dow 30

    -475.84 (-1.24%)
  • Nasdaq

    -267.10 (-1.62%)
  • Russell 2000

    -39.43 (-1.93%)
  • Crude Oil

    +0.43 (+0.51%)
  • Gold

    -12.50 (-0.53%)
  • Silver

    -0.28 (-0.99%)

    -0.0085 (-0.79%)
  • 10-Yr Bond

    -0.0770 (-1.68%)

    -0.0104 (-0.83%)

    +0.0370 (+0.02%)
  • Bitcoin USD

    -3,478.85 (-5.15%)
  • CMC Crypto 200

    0.00 (0.00%)
  • FTSE 100

    +71.78 (+0.91%)
  • Nikkei 225

    +80.92 (+0.21%)

State progressives launch coordinated push to raise taxes on the rich

A coalition of left-leaning state legislators announced a new effort Thursday to tax the richest Americans, simultaneously introducing bills across eight states.

The varied bills from California, Connecticut, Hawaii, Illinois, Maryland, Minnesota, New York and Washington differ on the details, but all share the same goal of increasing taxes on the wealthiest Americans through measures like changing rules around capital gains and — most controversially — instituting a wealth tax.

While many of the bills likely won't get enacted into law, the effort is symbolic of activists' increased aggressiveness on taxes on the state level as a divided Congress appears unlikely to pass any additional tax changes in the coming years.

"States are leaning into their power," said Charles Khan of State Revenue Alliance, one of the groups that helped organize the various state lawmakers this week.

"These past two years have really been a blacklight on this problem across our country," he added of the increasing income equality seen during the aftermath of the COVID-19 pandemic.

“Legislators across the U.S. are joining together to #TaxtheRich,” added one of the organizers, State Senator Gustavo Rivera of New York, on Twitter.

Varied proposals that would ‘dramatically increase the cost of investment’

Under the hood, the proposals differ in important ways.

In New York and Illinois, for example, the proposed bills would change the rules around capital gains and estate taxes to tax unrealized gains even if an individual hasn't sold the asset. This so-called mark-to-market form of taxation has been proposed at the federal level by Senate Finance Committee Chair Ron Wyden (D-OR).

"If we can tax the hard-working families of my neighborhood on the increased value of their house, then I know we can tax billionaires on the increased value of their stocks," said Will Guzzardi, an Illinois state representative leading the effort in his state, which proposes a new tax on the unrealized capital gains for people with a net worth of over $1 billion.

Meanwhile, the proposals in California and Washington state are direct wealth taxes modeled on national proposals that have been pushed by figures like Sens. Bernie Sanders (I-VT) and Elizabeth Warren (D-MA).

The California effort, led by a lawmaker named Alex Lee, would institute a 1% wealth tax on individual assets above $500 million and 1.5% on assets above $1 billion.

Phil White, a British millionaire poses with a placard reading:
Phil White, a British millionaire poses with a placard reading: "Tax the rich" next to the Congress centre during the World Economic Forum (WEF) annual meeting in Davos on January 18, 2023. (FABRICE COFFRINI/AFP via Getty Images) (FABRICE COFFRINI via Getty Images)

Across the board, lawmakers say the increased revenue would go toward issues like increasing affordable housing and ending homelessness, among others.

Meanwhile, the effort faces criticism from economists and tax experts who have long disparaged these types of efforts — especially a wealth tax — as unworkable.

Jared Walczak, vice president of state projects at the Tax Foundation, said all of the proposals will “dramatically increase the cost of investment, reduce the number of investments that will be profitable, and many of them will hit small business owners.”

“The wealth tax is probably the most politically extreme, but some of the other proposals would have a broader reach" and could hit more middle-class taxpayers, he added.

“Wealth taxes are back in a big way,” he added in a blog post, which further explained his arguments against the proposals.

‘The solution is plain for all to see’

Thursday’s move is also linked to international efforts underway this week against growing income inequality. A new letter directed to the global elites gathered in Davos pressured the leaders to increase taxes on the rich.

“The solution is plain for all to see. You, our global representatives, have to tax us, the ultra rich, and you have to start now,” read the letter, which was signed by over 200 left-leaning millionaires, including prominent names like Abigail Disney and American actor Mark Ruffalo.

And on Capitol Hill, Sen. Sanders delivered a speech Tuesday on the state of the working class where he argued “what we are witnessing now in this country is the rapid evolution of our society into an oligarchy in which the billionaire class has enormous and growing control over the economic and political life of the United States.”

“The time is long overdue for us to pay attention to oligarchy in our own country,” he said.

U.S. Senator Bernie Sanders (I-VT) is trailed by reporters as he arrives for the weekly Democratic caucus luncheon at the U.S. Capitol in Washington, U.S. November 29, 2022.  REUTERS/Jonathan Ernst
Sen. Bernie Sanders (I-VT) at the U.S. Capitol in November. (REUTERS/Jonathan Ernst) (Jonathan Ernst / reuters)

Back at the state level, even if the newly-announced measures were enacted, Walczak noted that wealthy Americans have plenty of options to avoid taxes simply by moving, which they can achieve by making their primary residence in another state without giving up any property.

For example, Elon Musk recently moved from California to Texas — a Republican-controlled state that is unlikely to hike taxes on the rich anytime soon.

But on Thursday, these lawmakers repeatedly brushed off concerns that the taxes would be simply avoided, saying that is the point of announcing them all at once and also that past efforts have not led to a mass exodus from their states.

"We always get these threats" said Noel Frame, a Washington State Senator proposing a wealth tax there.

Either way, this week's effort likely will kick off a flurry of debate in the coming months that could lead to new laws.

"A pure wealth tax is a heavy lift even in the furthest left of states," Walczak said, "whereas, some of the other proposals might gain more acceptance."

Ben Werschkul is Washington correspondent for Yahoo Finance.

Click here for politics news related to business and money

Read the latest financial and business news from Yahoo Finance

Download the Yahoo Finance app for Apple or Android

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube