Hefty estate taxes make sense, but in California they are complicated by houses in the urban regions whose values are hugely inflated, and by myriad small family farms. It will not affect only the top 0.2% of Californians, and for political reasons will be a long slog, not a quick fix.
The Reclaim California Higher Education project has offered an alternative, which would involve a marginal increase in the income tax (under $50/year on average), and can be implemented tomorrow. (Some of this is complicated by last year’s auditor’s report on UCOP, which shows that Napolitano’s office is out of control.)
It will barely effect the “1%”. As others have pointed out, they will find a way to shelter their money.
Inheritance tax hits the small, family owned businesses the hardest. I know its “$7 million” for a couple, but that’s pretty much the value of any successful family farm, 50 to 100 employee manufacturing company, etc. The problem is the value is tied up in the infrastructure. To pay the tax, the next generation has to sell half the land, lay off employees and sell a product line, sell the company, or whatever to raise the cash to pay off the windfall. I don’t agree with everything King George II did, but that was one thing that saved a lot of family farms from becoming corporate farms.
Yeah, but also most people understand that if you were going to leave your heirs $20M and instead you are leaving them $17.5M that’s still a lot of money. It’s 12-22%, not 95-99%.
Once you are talking about $7m farms or factories with 100 workers shouldn’t the owners have divested themselves from the business and set it up as a corporation? Then they can put their kids on the board and pay them a lavish salary without having to be taxed on it when they die.
From what I understand inheriting stocks is a great deal too, since the strike price is reset when the stock changes hands, avoiding those pesky capital gains taxes. It doesn’t have to be a public company to issue stock.
Yer missing an “of” after “social reproduction”. In fact if I would rephrase “building and reproducing an aristocracy,” but that’s just me. Yer <3 stands in any case.
There’s not actually a registration process for that. You would have to prove to CA that you changed your residence. If it was a phony one, they’d find out. They look at whether you brought your shihtzu with you, and stuff like that.
Trusts provide a lot of ways to shelter that wealth, though.
And that’s one of the reasons an estate tax is so necessary. The largest estates are mostly unrealized gains that have never been taxed.
This is an interesting wrinkle in the whole issue, and you’re almost definitely right that it will complicate the development of the legislation, but calling $7 million in assets a “small family farm” doesn’t really negate the fact that that is a huge inheritance, even if most of it isn’t liquid. That may be small for a farm, but it’s still a sizable leg up on those born not into families with such farms, if you take the sociological argument for inheritance taxes (rather than just a simple Eat the Rich revenge fantasy, which I’m not necessarily pooh-poohing, mind…). Incorporation doesn’t have to mean everything that comes with “going corporate” it exists for other reasons. “A Family Run Business” for some reason warms the cockles of people’s eco-hearts, but there are sound economic and social reasons why “I birthed 'em” isn’t the best way to pick the next ruler of a small economic polity…
I’ve lived in both Arizona and California, and, frankly, any million/billion/zillonaire who would trade CA for AZ just to save on estate taxes is a complete idiot.
And here in CA, we’re already oversupplied with complete-idiot millionaires, so their out-migration would do a lot to improve the social atmosphere at the country club. (-:
Bit of an unexpected side-benefit, I know, but if it comes with free college for everyone, I’ll take it.
I’ve heard the “if we raise taxes on the rich, the rich people will leave!” argument many times. Too few times does someone come in with a proper “good riddance” response, so thank you for your service.
I think the (right-wing) NP has a good argument that free tuition is a regressive measure, since aid to disadvantaged students would more effectively target inequality.
Kershaw won’t move to Idaho, but I wouldn’t be surprised if he were to set up an out of state trust.
Look at all the companies that incorporate in Delaware even though most of their business is in other states. You don’t think individuals are just as greedy?
If you are a wealth advisor, don’t you have an obligation to suggest your clients establish a trust outside of California to hold their wealth?
This seems to get around the problem brought up by @jandreseabove; it’s harder to move a parcel of land to another state than it is to move a trust or tax domicile. I also like the idea discussed by @d_r of a small increase in state income tax, perhaps allowing for the exemption of a primary residence or a small family farm from the estate tax proposal.
As appealing as it sounds, I’m not sure if this initiative will pass as-is. Putting aside the usual objections of wealthy people and Libertarians, the whole student debt industry is going to unleash hell on this proposition. This is the problem with doing these things by ballot proposition, which tends toward simplistic solutions and allows for simplistic objections (“this will take your house from your kids!”), with the winner often determined by who has the most to spend on TV and billboard ads.
However it turns out, the application of funds to allowing more young Californians to get a post-secondary education without getting mired in ruinous and endless debt is a worthy one that will make a prosperous state more prosperous in the future.
Yer missing an “of” after “social reproduction”. In fact if I would rephrase “building and reproducing an aristocracy,” but that’s just me. 
Yer <3 stands in any case.
