California and other blue states think they have come up with a solution to the problem of their residents fleeing for lower taxes and better quality of life. The Golden State is reportedly proposing an "exit tax" that would target wealthy individuals or businesses who decide to move out of state. The tax is equal to 0.4% of the net worth of an individual or business over $30 million in a tax year, and it can follow the taxpayer to another state for up to 10 years.
The move comes as California faces a massive budget shortfall while its population has declined for three straight years. "This is just the latest attempt by California to grab every last penny they can," says Chuck DeVore, vice president with the Texas Public Policy Foundation and a former California assemblyman. "This latest grasp by California trying to fill its massive budget deficit brought on by profligate spending isn't going to pass constitutional muster."
DeVore tells KTRH there is already Supreme Court law on this issue dating back to the 1800s, when Nevada tried to tax the stagecoaches of people leaving the state. "The Supreme Court said you can't do that, because it is an unconstitutional restriction on the freedom of movement, of Americans to move about the country," he says.
Even if the exit tax was somehow deemed legal by the courts, it would be unlikely to stop the exodus from blue states. "If anything, this is only going to make (California's) problems worse," says DeVore. "I can guarantee you're going to have a lot of wealthy Californians, who can afford to pay tax attorneys and fancy accountants, look into how is it they can move out of California and still get the benefits of California."
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