The push for wealth taxes is moving from national debates to state and local legislatures in the United States. While most proposals remain symbolic, several states have introduced concrete measures that could affect high‑net‑worth individuals and, indirectly, anyone with substantial assets.
Washington’s Senate Bill 54‑26
- Tax rate: 1 % on intangible financial assets (stocks, bonds, futures, publicly traded options).
- Exemption: The first US $1 billion of assessed wealth per resident is exempt.
- Scope: Applies to worldwide taxable wealth, not just assets held in Washington.
- Rationale presented in the bill: The tax is framed as a fairness correction, arguing that lower‑income earners currently pay a higher share of their income than the top 1 % of wealth holders.
California’s retroactive wealth‑tax attempt
- Target: Residents and former residents, including those who have left the state.
- Status: The proposal generated significant opposition and has not been enacted, but it signals a willingness among state lawmakers to consider retroactive wealth levies.
Other state trends
- Arizona: In 2020, the state nearly doubled taxes on individuals earning more than US $250 000 per year.
- Maryland, New Jersey, and other states: Discussions are underway about imposing additional taxes on high‑value property and capital gains, prompting concerns that wealthy residents may relocate.
Potential ripple effects
- Broadening tax bases: Even if initial thresholds target only billionaires, states may expand the scope over time to capture wealth in the US $50 million–$100 million range, which aligns with the valuation of many mid‑size businesses.
- Impact on businesses: Companies generating US $5 million in annual revenue can be valued at US $50 million in a low‑interest, inflationary environment, placing them within the reach of emerging wealth‑tax thresholds.
- Trickle‑down consequences: New taxes on capital gains, property transfers, and other asset categories can increase the overall tax burden for a broader segment of the population, not just the ultra‑rich.
Relocation considerations
For individuals seeking to minimize exposure to emerging wealth taxes, jurisdictions with low or no state income tax and limited wealth‑tax provisions are attracting attention:
- Puerto Rico: Offers significant tax incentives for qualified residents under Acts 20/22 (now consolidated under the Incentives Code).
- Panama: Provides a territorial tax system where foreign‑sourced income is generally exempt from local tax.
- Penang, Malaysia: Features a low personal income tax rate and a favorable environment for expatriates.
Conversely, the speaker advises against moving to states such as Idaho, Montana, or Texas, suggesting that these locations may not provide the same level of tax protection as the jurisdictions listed above.
Practical steps for high‑net‑worth individuals
- Monitor state legislation: Track bills like Washington’s SB 54‑26 and similar proposals in other states.
- Assess asset composition: Determine the proportion of wealth held in intangible assets that could be subject to a wealth tax.
- Model tax scenarios: Compare the projected tax liability under current state rules versus potential future wealth‑tax regimes.
- Consider domicile changes: Evaluate the tax environment, residency requirements, and overall cost of living in alternative jurisdictions.
- Consult tax professionals: Engage advisors familiar with multi‑jurisdictional tax planning to ensure compliance and optimize tax exposure.
The trend toward local wealth taxation suggests that high‑net‑worth individuals and businesses should proactively review their tax residency and asset structures to avoid unexpected liabilities as states expand their fiscal tools beyond traditional income and sales taxes.
