Wealthy Californians could face billions in new taxes after midterm elections


Companies run from California over progressive policies

Barron’s Managing Editor Daren Fonda discusses the exodus of companies from California over progressive policies, and restaurant labor shortages on ‘Barron’s Roundtable.’ 

Rich Americans living in California could see their already-steep taxes soar even higher if voters approve a controversial tax-the-rich ballot measure in this year's November midterm election. 

The measure, Proposition 30, would hike taxes by 1.75% on those earning $2 million per year, generating up to $5 billion in new revenue annually. The bulk of that money would go to programs that help people buy electric cars and install charging stations. A smaller portion would go toward wildfire prevention efforts. 

The proposed wealth tax has drawn opposition from billionaire donors and Gov. Gavin Newsom, a Democrat. 

That is because the ballot measure's biggest financial backer is the ride-sharing company Lyft, which donated at least $45 million ahead of a mandate that will require the majority of its drivers to use electric vehicles by 2030. 


A glowing sky provides a colorful backdrop to the downtown Los Angeles skyline as seen from Boyle Heights on Tuesday, March 15, 2022 in Boyle Heights, CA.  (Myung J. Chun / Los Angeles Times via Getty Images / Getty Images)

Newsom has belittled the tax as a "cynical scheme" by Lyft to meet the state's EV mandate – at the expense of the taxpayers. 

"Prop 30 is being advertised as a climate initiative," Newsom said in an advertisement last month against Prop 30. "But in reality, it was devised by a single corporation to funnel state income taxes to benefit their company. Put simply, Prop 30 is a Trojan horse that puts corporate welfare above the fiscal welfare of our entire state."

Proponents of the measure have said it could help to facilitate the clean vehicle transfer that Newsom has so vehemently pushed for as California – the largest new car market in the country – tries to shift away from gas-guzzling vehicles that are one of the main culprits of climate change. 

Should the tax pass, wealthy Californians would see the top marginal rate on their wage income climb to 16.15%. California already has the highest income tax in the country, with a top rate of 13.3% for those earning more than $1 million. 


California Gov. Gavin Newsom leaves a news conference after unveiling his proposed $286 billion 2022-2023 state budget during a news conference in Sacramento, California, Monday, Jan. 10, 2022.  (AP Photo/Rich Pedroncelli / AP Newsroom)

On top of that, the proposition does not include a carve out for married couples, meaning that the extra 1.75% excise tax would kick in at $2 million for both single and joint filers, creating a so-called "marriage penalty," according to the Tax Foundation, a non-profit group that advocates for lower taxes. 

Notably, the bracket's kick-in would not be adjusted for inflation (unlike the state's regular income tax brackets), despite the fact that consumers are grappling with the steepest prices increases since the 1970s. Nationwide, the median top marginal income tax rate will be around 5%.

The proposal comes as California grapples with an exodus of residents who are fleeing the state for more affordable destinations like Florida, Tennessee, Texas and Nevada that have a lower tax burden. 

California actually saw its population shrink by 0.8% in 2021, as more Americans migrated to red states with lower taxes, according to a separate Tax Foundation report.

Tesla CEO Elon Musk called for more drilling and fossil fuel resources on Monday, Aug. 29, 2022, warning humanity could be ‘in trouble’ if exploration is curtailed. (AP Photo/Jae C. Hong, File / AP Newsroom)

Some of the most notable residents to flee include Tesla CEO and the world's current richest man Elon Musk, who left for Texas after complaining that California had become the "the land of sort of overregulation, overlitigation, overtaxation." Oracle CEO Larry Ellison, Dropfox co-founder and CEO Drew Houston and Palantir co-founder Joe Lonsdale also left the state. 


Companies including Oracle, Palantir and Hewlett-Packard Enterprise have also packed up and relocated their headquarters from the Golden State. 

"With 21 states cutting individual income tax rates since last year, such increases set California at even greater odds with its state competitors," Tax Foundation vice president of state projects Jared Walczak said.

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