California Considering its own Estate Tax

I’m not one to typically complain about taxes, some of my more conservative friends get frustrated with me when I tell them I’m comfortable paying for social safety nets and for whatever other services we demand of our government. However, these past few months I feel like California is coming at me from all sides. First, there have been many Senate Bills recently proposed that would either raise property taxes and/or make it easier for local communities to raise their parcel taxes. While California property taxes may not be the highest in the nation as a percentage of the property’s value, the average home value in the Bay Area is high enough to result in some of the highest dollar amounts paid in property taxes in the U.S. Although, Prop 13 does protect some folks.

Now California is looking at creating its own Estate Tax, currently there is none. SB 378 would tax 40% of California estates larger than $3.5 million for an individual and $7.0 millions for a couple. To avoid double taxation by the state and federal government, SB 378 stipulates the California version would phase out once the value of a deceased resident’s estate hits the federal threshold. The revenues from this tax would be earmarked for programs designed to combat income inequality.

I am not for oligarchs and I don’t like the idea of families passing on huge fortunes from one generation to another (sorry conservative friends). However, this latest tax proposal just feels exhausting, like California is really trying to squeeze the last drop of blood from everyone. There are so many new tax proposals. I had recently posted something about people leaving California for many reasons, but high taxes was high on the list and I’m beginning to sympathize.

We already have high property taxes in the Bay Area, plus Californians pay some of the highest state income taxes in the Nation (13%). While not California’s fault, I do already pay over 32% to the Feds for my income plus another 15% for social security/medicare because I’m an independent business person. Then the Feds took away many of my deductions with the new tax laws and California has a nearly 9% sales tax. I also get taxed when I buy gas, use my phone, the internet, and maybe even breathe.

The 10 highest income tax states for 2018 were:

  • California 13.3%
  • Hawaii 11%
  • Oregon 9.9%
  • Minnesota 9.85%
  • Iowa 8.98%
  • New Jersey 8.97%
  • Vermont 8.95%
  • District of Columbia 8.95%

People often say that some of the Nordic countries have the best quality of life, but we don’t want to be them because they are taxed up to 70%. I feel like I’m already there without all the bennies that are suppose to make the Bay Area the happiest place on earth! Of course I love living in the Bay Area and am just whining, I’m not going to leave.

Source: World Economic Forum

For SB 378 to become law it will need to be passed by the Legislature, signed by the governor, and then ratified by voters in the November 2020 statewide election. This is because a 1982 ballot measure banned a state-level estate tax, which means any change would have to receive final approval on election day.

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