California’s Other Wealth Tax
California is once again testing how much punishment capital will tolerate before it packs a bag. The state’s impending ballot proposition imposing a “billionaire’s tax” has drawn plenty of attention for precisely that reason: If the tax drives enough wealth elsewhere, it could lose more revenue than it raises. But a quieter proposal now moving through Sacramento could impose an effective tax on a much broader segment of the economy.
Late last month, the California Assembly passed the COMPETE Act, based on recommendations from the California Law Revision Commission. The bill is now under consideration in the California Senate. The act would significantly expand liability under the Cartwright Act, California’s antitrust statute, to such an extent that it would likely become the most interventionist state antitrust law in the country.
As currently drafted, the statute could place a wide range of common business practices at legal risk. That would make California an antitrust outlier and could discourage investment and economic growth. At the same time, there is no assurance the statute would benefit consumers and, in some circumstances, it could even leave them worse off.