CALIFORNIA COMMENTARY: The wealth tax allows the Legislature to circumvent Prop 13

The opinions expressed by columnists are their own and do not necessarily represent the views of Crescent City Times.com

Sacramento politicians are asking Californians to believe a familiar story again: don’t worry, this tax only applies to someone else.

This time, it is wrapped in the language of fairness and sold as a “billionaire tax.” But when you actually read the fine print on how the ballot measure is structured, the reality becomes crystal clear. This is not simply a tax on billionaires. It is a framework that will allow future Legislatures to expand new taxes onto your property, savings, investments, retirement accounts, taxing  millions of Californians who would never consider themselves billionaires.

We’ve seen this story before. Today starts with taxing billionaires, tomorrow it’s exploited as a massive loophole to find new ways to tax your home.

That is why this debate matters to every homeowner, every small business owner, every retiree, every family trying to hold onto a home in California, and every Californian who thought Proposition 13 protected them from exactly this kind of slow-moving tax increase.

Because this measure creates something far more dangerous than a one-time tax. It creates a new mechanism to tax every Californian’s assets – their home equity, savings account, retirement savings, even their furniture and pets.

Supporters want voters to focus on billionaires but the unions included language  for future Legislatures to amend and expand the measure later with a two-thirds vote. Once that authority exists, Sacramento politicians could redefine who gets taxed, what assets get taxed, and how far those taxes extend.

One of the most insidious details in the bill is how the authors wrote it to allow the Legislature to circumvent Prop. 13. The authors of the measure aren’t stupid, and they deliberately structured the initiative so the current exclusion for real property exists in statute — specifically in the Revenue and Taxation Code — rather than as a permanent constitutional protection. That distinction matters enormously.

Why? Because the same measure explicitly grants the Legislature authority to amend the “2026 Billionaire Tax Act” with a two-thirds vote, so long as lawmakers claim the changes further the purposes of the act. In other words, the initiative itself hands future Legislatures the power to rewrite key portions of the tax structure after voters approve it.

That is the bridge around Proposition 13.

The measure first creates constitutional authority for non-uniform taxation of property. It then places the actual exclusion for real property into statutory language that can later be amended by the Legislature with a two-thirds vote. So while supporters say today that homes and real estate are excluded, the mechanism to remove that exclusion without a vote of the people already exists inside the measure itself.

The result is a simple but dangerous formula:

1. Create new constitutional authority for wealth taxes with pre-planned loopholes to exploit long after voters make their decisions.
2. Place property exclusions in amendable statute instead of permanent constitutional language to protect taxpayers.
3. Empower the politicians in the Legislature to later rewrite those statutes with a two-thirds vote.
4. Circumvent Prop. 13 by allowing the Legislature to expand taxes onto real property without going back to voters for another statewide ballot measure.

Prop. 13 was designed to stop politicians from endlessly escalating property taxes on Californians. But this proposal is carefully constructed to create a legislative pathway around those protections to impose a new tax on home equity.

If the government gains the authority to treat accumulated assets, e.g., your home equity, as a permanent source of taxation, the definition of “wealth” becomes whatever politicians need it to be in order to close the next budget deficit.

That should concern everyone.

California already has some of the highest taxes and highest costs of living in the nation. Families are paying more for housing, electricity, gasoline, insurance, groceries, and child care than almost anywhere else in America. Businesses and residents are already leaving the state because they simply cannot afford to live here anymore.

Now imagine layering an entirely new type of tax on top of the income, sales and property taxes you already pay – an asset tax on the value of your home equity, real estate, retirement savings, investments, and even personal property.   

The economic consequences would ripple far beyond the small group of billionaires the politicians are using as the face of the campaign.

Housing costs would rise.

Families would be priced out of their lifelong homes due to skyrocketing taxes on home equity.

Investment would slow.

Capital would leave the state faster.

Family-owned businesses would become harder to sustain.

Retirement planning would become more uncertain.

And once government normalizes the idea that wealth itself — rather than income — is permanently taxable, the pressure to lower thresholds of who pays becomes inevitable because California’s budget crisis will not subside anytime soon.

California politicians are not proposing this because they lack revenue. California has collected historic levels of tax revenue over the last decade. In fact, according to the nonpartisan Legislative Analyst, state spending has increased $100 billion in the last six years! The problem is not that Sacramento lacks money. The problem is that Sacramento has created a system in which spending consistently outpaces reality.

When politicians create new powers to tax property, savings, investments, and accumulated assets, those powers never remain limited to a tiny handful of people forever.

This is not a billionaire tax.

It is an everyone tax.

Jon Coupal is president of the Howard Jarvis Taxpayers Association. Rob Lapsley is president of the California Business Roundtable.