By: Mark Glennon*
In a coordinated effort, legislators in seven states, including Illinois, will introduce legislation on Thursday for their states to impose a wealth tax, according to reports Tuesday by the Tax Foundation and the Washington Post.
The seven states, that collectively hold about 60 percent of the nation’s wealth, are California, Connecticut, Hawaii, Illinois, Maryland, New York, and Washington, according to the Tax Foundation.
Details are still thin, but the Washington Post reports that Illinois’ proposal will be for a tax on wealthy people’s holdings, or so-called “mark-to-market” taxes on their unrealized capital gains. That means, for example, that you could be taxed on what the value is of a stock at some given time, regardless of whether you later sell it for a loss.
The proposals in each of the seven states apparently will be variations of the central proposal for a federal wealth tax championed by Massachusetts Senator Elizabeth Warren. The concept has not progressed at the federal level, so supporters are turning to progressive states to implement it.
The Washington Post put it this way: “Left-leaning proponents of taxing the assets held by America’s billionaires have a new target: In lieu of a federal wealth tax, state lawmakers want to tax billionaires where they live.”
The concept is absurd, particularly at the state level. Wealth is frequently in forms that defy rational valuation, such as privately held companies, high-growth tech companies, intellectual property like patents and trademarks and artwork. Even when valuation is clear, as with publicly traded stock, the unfairness of taxing unrealized gains would be obscene. Elon Musk’s stock holdings, for example, are worth some $200 billion less today than they were worth in 2021. Imagine if a wealth tax had been imposed on him then.
Most importantly, and most obviously, the wealthy would immediately flee any state that imposed a wealth tax – as they no doubt already are. Every one of the seven states where a wealth tax will be imposed were net losers in domestic migration according to the annual Census Bureau estimates released last month.
Names of the Illinois legislators who will introduce the bill are unknown at this time.
In other news, a leading Illinois state senator says he will rekindle efforts for a graduated income tax, which was defeated at the polls in 2020. When it comes to their role in Illinois’ suicide, progressive legislators are nothing if not persistent.
*Mark Glennon is founder of Wirepoints.
UPDATE: The left’s Institute on Taxation and Economic Policy has also now written to endorse the proposals.
