There's a $1000 Leaving Town Tax

This isn't really big news, since I seriously doubt even in California such a brainless referendum would ever pass. Nevertheless, here's the latest, craziest initiative proposal. The Taxprof summarizes nicely:

A California activist is trying to gather the 694,354 signatures needed to place a tax initiative on the ballot that would:

* Impose a new 35% income surtax (in addition to federal taxes and the existing 10.3% top state rate) -- 17.5% (on all of the taxpayer's income) when income exceeds $150,000 (single)/$250,000 (joint), and an additional 17.5% (again, on all of the taxpayer's income) when income exceeds $350,000 (single)/$500,000 (joint).
* Impose a one-time 55% wealth tax on assets exceeding $20 million held by a California resident or held in California by nonresident.
* Impose an exit tax of between 36.5% to 54.3% on both income and unrealized appreciation in asset values over $5 million when a resident dies or leaves California.

The last part (hilariously named the "Hasta La Vista Tax") is the wackiest provision, promising to take half of of the assets of someone for having the temerity to leave the state.

Or at least I would think this is crazy, but maybe not. After all, onerous exit taxes are official United States policy:

In 1996, Congress tried to address a wave of tax-driven expatriation by the wealthy by requiring former citizens to file tax returns for a decade and forbidding Americans who renounced their passports for tax reasons from visiting the United States.

That's right: Leave the United States, leave behind your citizenship, and you still pay taxes for ten years. Honestly, this makes me madder than just about anything the national government does. Upset about the drug war? You're free to leave (not that many countries are more accommodating, but in principle they could be). But don't want to pay over half your income to the government? Too bad. Not even leaving the country will allow you to escape.

Share this

Actually, I think you're

Actually, I think you're misreading that. If you live overseas but maintain your citizenship, you have to pay taxes for 10 years (I think the first $80,000 or so is exempt, and you get a credit for any taxes paid to the country in which you live and work, so it's really only applicable if you live in a country with lower taxes). If you renounce your citizenship for the purpose of avoiding taxes (in the government's judgment), then you don't have to pay taxes—i.e., they won't try to extradite you—but you'll be exiled.

Which is still lame, but at least they won't try to hunt you down and make you pay taxes if you renounce your citizenship.

Also, I wonder how enforceable the exit tax would be. Except for real estate, it's very easy to transfer wealth out of state, so California couldn't just take the money—they'd have to extradite you, and I'm not sure other states would cooperate, since they'd presumably want to attract wealthy ex-Californians for the tax revenue they'd bring. Also, it could run afoul of the clause of the Constitution which says "No Tax or Duty shall be laid on Articles exported from any State," depending on how the courts interpreted "Articles."

If it did pass, it would probably drive a bunch of software companies up to Seattle, which is good news for me.