00:00Michael, how is a wealth tax different from income tax or the proposals for a millionaire or billionaire tax?
00:08Right, right. There's been so much discussion about wealth taxes recently, and it gets a little confusing.
00:17A lot of these wealth taxes are actually income taxes.
00:21And the classic example is what Massachusetts did a couple of years ago, imposing a 4 percent surtax on annual
00:29income above a million dollars.
00:32And we've seen a couple of other states do stuff like that.
00:36And states that have graduated income taxes have created maybe a new top tier, which some have called a wealth
00:44tax.
00:45In fact, a wealth tax is more like what Bernie Sanders and Elizabeth Warren were talking about a few years
00:52ago at the federal level,
00:53where you would do some sort of annual assessment of the wealthy person's various assets, including stocks, bonds, real estate,
01:03et cetera, minus your liabilities.
01:05And then there's a levy on that net value that you have in your portfolio.
01:10Now, in terms of what this means for municipal bonds, analysts say it's positive because munis offer tax shelter for
01:16residents in those states.
01:18For muni investors, what they want to know is, would these higher taxes affect credit quality?
01:23So, Michael, I'm asking you, how do you see these potential new taxes being discussed across these different states changing
01:29the state's tax base?
01:32Well, I mean, conceivably, I mean, states are doing this because they want more revenue.
01:37And states are very sensitive to erosion in their tax bases.
01:43And there's a perception that uber-wealthy individuals aren't paying their fair share.
01:50And since many of them don't really have conventional income, why don't we tax their wealth?
01:56And so that's kind of where the thinking is for a state who's maybe thinking in this direction.
02:02OK. And there are a bunch of states that are considering this, right?
02:05You've got Minnesota. You've got Maine. There's a referendum in California.
02:08And I mentioned New York earlier. Which state are you following most closely?
02:12Which one captures your interest?
02:14Well, so Maine did create a surtax recently.
02:17And then Washington did a 9.9 percent tax on income above a million dollars.
02:24Those, again, are income taxes.
02:26The only wealth taxes would be what California are doing and what Minnesota is talking about doing.
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