Tax Update: Wealth taxes make a comeback in seven-state effort
- March 1, 2023: Vol. 10, Number 3

Tax Update: Wealth taxes make a comeback in seven-state effort


The Tax Foundation, an independent tax policy nonprofit, reports that in a coordinated effort, lawmakers in seven states that collectively house about 60 percent of the nation’s wealth — California, Connecticut, Hawaii, Illinois, Maryland, New York and Washington — introduced wealth tax legislation. The campaign is part of a broader national focus on new taxes on investment, entrepreneurship and wealth. The proposals include taxing unrealized capital gains and expanding estate taxes. In some states, lower estate tax thresholds would impose the tax on the upper middle class and not just the very wealthy, including the small businesses and farms policymakers have long worked to protect from estate taxes to avoid forcing them to break up to pay the tax. And the wealth taxes themselves would vary across the seven states, partly due to differing state constitutional constraints.

Half of states plan to cut taxes by end of 2023: The Wall Street Journal reports that statehouses across the country are continuing to cut taxes in a movement that shows no sign of slowing down. By year-end, nearly half of all states will have cut their income-tax rates within a three-year period. At least six states have kicked off their 2023 legislative sessions with income-tax cut proposals. Newly inaugurated governors in Arkansas and Nebraska campaigned on rate cuts and are asking legislators to follow through. Leaders in Virginia and Montana want to cut rates modestly with bipartisan support. Large GOP majorities in West Virginia and Utah are considering significant cuts after hesitating last year. The tax-cutting trend took off in 2021 as state revenues boomed, driven by post pandemic reopening, rising stock prices and capital gains, and federal aid. By September 2022, 31 states were outperforming their pre-pandemic revenue trajectories, according to Pew Research. Twenty-one states have cut their income taxes in this period, according to the Tax Foundation, and they’re betting that returning revenue to taxpayers will spur faster economic growth.

Biden includes tax hikes in State of the Union speech: The Wall Street Journal reports that president Biden proposed new tax hikes during his State of the Union speech. Biden said the law he signed last year that required large companies to pay at least 15 percent needed to be tightened, saying some profitable companies still pay little or nothing. Biden also touted his “billionaire minimum tax” proposal, which he tried and failed to advance through the democratic Congress last year. Biden’s minimum-tax proposal would require people with net worth exceeding $100 million to calculate their income by adding unrealized capital gains. Then, off of that larger base, they would have to pay at least 20 percent. Biden also called on Congress to pass the Protecting the Right to Organize Act. The Republican-controlled House is unlikely to pass these plans, but Biden is likely to keep talking about it as he looks for ways to counter Republicans’ push to reduce budget deficits with spending cuts.

Stock buybacks race to record in 2023: Financial Advisor Magazine reports that although president Joe Biden dislikes them, corporate America continues to splurge on its own shares — a force that has fueled the new year rally. In the first month of 2023, announced buybacks more than tripled to $132 billion from a year ago, reaching the highest total ever to start a year, according to data compiled by Birinyi Associates. The planned repurchases surpassed the previous January record, set two years ago, by more than 15 percent. There are signs that corporate demand is picking up pace as companies emerge out of an earnings-related blackout. Recently, the Morgan Stanley desk that executes buybacks for clients saw orders increase 5 percent, according to the firm’s trading team. That comes despite a new tax to discourage American firms from stock repurchases. The law imposing a 1 percent tax on buybacks takes effect this year. The president proposed raising the tax to 4 percent.

Global minimum tax deal advances: The Wall Street Journal writes that international officials are moving ahead with global corporate tax increases, while giving U.S. companies a temporary break from some tax hikes in hopes of prompting the United States to implement the deal. The Organization for Economic Cooperation and Development spelled out how the U.S. tax system will interact with the minimum taxes being implemented in the European Union, the U.K., South Korea and other countries. The rules offer a partial reprieve for U.S. companies through 2025. Still, U.S. companies are likely to face higher taxes abroad. The United States in 2021 won international backing for the global minimum tax rate, a priority of the Biden administration. But the administration couldn’t push the plan through Congress.


This report was compiled by the Alternative & Direct Investment Securities Association (ADISA). To stay current on all of the organization’s advocacy initiatives, visit the ADISA website.

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