What do the Red-Hot Chili Peppers have to do with tax policy?
One of the Red Hot Chili Peppers’ biggest hits is Californication, which is about how the whole country — and even the world — is becoming a carbon copy of Caledonia. While that may be a little extreme, it is true that California is the leader in matters of culture and even politics. For example, California not only launched the political career of Ronald Reagan, it was the birthplace of the 1970s tax revolt that helped propel Reagan into the White House.
Today, California may be the epicenter of a very different tax revolt, as the most populous state in the union may soon implement a carried interest tax. The legislation, AB-2731, creating a state-level carried interest tax, is pending before the California state legislature. If it passes, it will give a boost to the forces pushing for a national carried interest tax.
A state-level carried interest tax would drive business and jobs away from California. Ironically, this could be used to strengthen the case for a national carried interest tax as pro-tax forces would say that the federal government must act to prevent a race to the bottom among the states.
The good news is that the bill requires a supermajority to pass. So, if Republicans, such as California Assembly Republican Leader Brian Dahle, Vice Chair of the Committee on Appropriations Frank Bigelow, and Vice Chair of the Committee on Revenue and Taxation Bill Brough stand firm, we can kill this bill.