Teacher unions have never been known to stay in their lane. Conflict in the Middle East, so-called “climate change,” and abortion are just a few of the policies outside education on which the American Federation of Teachers and their locals take a position. No surprise, then, that an AFT campaign has been resurrected by activists to try to steer state lawmakers on tax policy. But what they get may be the opposite of what they intended.
Claiming that they should “make the wealthy pay what they owe,” a campaign based on another effort by the American Federation for Teachers called “Fund Our Future” is attempting to “move wealth tax measures across the country.”
Lawmakers in California, New York, Illinois and elsewhere are now considering legislation aligned with Fund Our Future’s demands, including new taxes on net wealth and unrealized capital gains, doubling down on these states’ already high taxes.
But to collect tax revenues, states need taxpayers. Unfortunately for legislators in these states, over-taxation and bad governance lead citizens to leave for greener pastures. According to the Census, more than 784,000 Americans moved out of California, New York, and Illinois than moved into these three states between July 2021 and July 2022. California alone lost a net of 343,000 residents to other states.
One of the new soak-the-rich tax proposals, California’s AB 259, would impose a 1 percent annual tax on Californians with a net worth above $50 million. The rate would rise to 1.5 percent at a net worth of $1 billion. The net-worth tax would come on top of existing federal taxes and California’s already highest-in-the-nation state income taxes. The new tax would be levied yearly on the value of most financial assets and business interests. Of course, accurately determining the value of closely held private companies is almost impossible, so lawmakers have resorted to unreliable “proxy valuation formulas.”
California legislators should know better than most that wealth on paper can be fleeting. The market value of the state’s three most valuable companies dropped by 45 percent in 2022. But the bill provides no relief to taxpayers previously overtaxed on assets that drop in value.
Poorly designed taxes that target millionaires will, of course, drive out millionaires who account for an outsized share of state tax revenues. In California, the 0.5 percent of tax returns with incomes in excess of $1 million account for about 40 percent of the personal income taxes paid in the state. But California legislators have a devious—albeit unconstitutional—way to avoid losing this lucrative tax base: They intend to tax former residents after they have left. The bill would apply the tax to those who had a California residence within the last four years.
The AFT’s original campaign promoted these efforts using videos that open with ominous music, declaring that five of the 11 states with the lowest levels of per-student spending also have low tax rates on the wealthy. Two of these states—Florida and Texas—are now the fastest-growing states in the United States, while the blue triumvirate of California, New York and Illinois saw the most significant population declines.
Fund Our Future will not slow those losses, nor will it do anything to stop their declining membership. The Bureau of Labor Statistics reports that public and private union membership—including the National Education Association and the AFT—is falling. According to analysts, overall union membership stands at its lowest since federal officials began collecting data in 1983.
Increasingly, blue-state lawmakers and their teacher union allies act like prison guards, locking the cell doors to prevent escape. Instead of blocking the exits, they should focus on fixing the problems that make people want to leave in the first place. Lawmakers should follow what’s working in states like Florida and Texas, attracting many new residents.
Florida operates the largest private school scholarship program in the nation, along with education savings accounts serving children with special needs. Texas and Florida offer 1,500 charter schools between them, and Texas lawmakers are currently considering proposals to create private learning options like those in Florida. Texas and Florida are also two of the nine U.S. states with no state income tax.
Americans have no problem voting with their feet. Politicians, union leaders and activists who perennially call for new and higher taxes will only accelerate the exodus of taxpayers and pupils.
This piece originally appeared in the DC Journal