Given that the billionaires’ wealth tax is being voted on tomorrow in California, I thought we should take one final look at it. I’ve described the basics many times but very briefly this is not just another tax on income. This is an actual wealth tax aimed at about 200 billionaires living in California. If it passes, the state will tally up all their wealth and then demand they hand over 5 percent of it.
The tax was created and pushed by a group of progressive economists at Berkeley and then pushed at the ground level by a California healthcare union. The plan is that 90 percent of the money would go to healthcare in the state, primarily Medi-Cal, California’s version of Medicaid which recently became available to everyone, regardless of immigration status.
The real goal of this proposal, as the proponents have admitted, isn’t just a windfall for healthcare unions in one state. Ultimately, supporters want to see the idea of a wealth tax on billionaires expand from California to other states or, ideally, to the national or global level.
On one side of this debate is economist Gabriel Zucman, a leading advocate for taxing the superrich who splits his time between UC Berkeley and the Paris School of Economics. Zucman helped design the national wealth tax proposals of Senators Elizabeth Warren and Bernie Sanders when they were running for president…He is the author of a new book with a blunt title: We Need To Tax Billionaires…
“If California says, ‘We can tax billionaires. We can tax the wealthiest, most powerful people in the world,’ it will be the beginning of not only a broader U.S.-wide movement, ultimately paving the way for a federal wealth tax — but I think it will be the beginning of an international movement,” Zucman tells Planet Money.
Zucman and his fellow progressives predict that the California tax could raise $100 billion and he’s said before that the state could eventually look at doing this again if it works. In other words, it’s a one-time tax in name only.
But other economists think he’s daydreaming.
On the other side of the debate is Stanford economist and Hoover Institution senior fellow Joshua Rauh. His analysis, co-authored with Benjamin Jaros, comes to a wildly different conclusion: the tax could lead to an exodus of billionaires out of California, damaging the state’s economy and blowing a hole in the income tax revenue the state already collects from billionaires.
“ It would not raise $100 billion for the state,” Rauh argues. Instead, he estimates, this tax could actually end up draining California’s state coffers. “ We calculate that Proposition 40 would cost the state of California $39 billion.”
About a third of the money Zucman was hoping to tax has already left the state before the retroactive (and likely illegal) Jan 1 deadline. So there’s no chance this thing raises $100 billion. That’s purely a marketing number by an economist acting as a politician.
Despite this effort at misleading people, the tax isn’t terribly popular.
The October poll from the Public Policy Institute of California, a nonpartisan think tank, found that 46% of likely voters said they would vote yes on the proposed tax, down from 52% in September:..
Polling from Berkeley IGS found a similar trend. In October, IGS found 50% of likely voters intended to vote no on the tax, while 42% planned to vote yes, with 8% undecided…
The proposition needs more than 50% of the vote to pass, though that also depends on the fate of two other ballot measures: The one time tax will take effect only if Props 41 and 42, which have provisions that conflict with Prop 40, fail.
So it’s not looking good. To be fair, billionaires have spent a lot of money driving support down.
“Building a Better California,” a coalition funded by Sergey Brin, Eric Schmidt and multiple other billionaires, has spent more than $148 million to defeat Proposition 40. In total, opponents have raised more than $379 million to kill the “Billionaire Tax Act,” making it one of the costliest electoral battles in the history of California, where ballot campaigns that spend more than $100 million have become almost routine.
It is a lot of money but as I said earlier today in another post, I’m not convinced money wins elections. In this case, the message that turned people off the most was that this will not be a one-time tax and will not stop with billionaires. So, in my opinion, the thing that may doom this is the truth.
Like the proponents of the tax, the opponents also see the big picture. They’d like to strangle this now and make sure it’s a dead issue in 2028. After all, if it can’t even pass in California it really has no chance nationally.
An internal document from a group opposing the tax said it seeks to “chill wealth tax efforts nationally” by defeating Proposition 40, according to previous reporting by The New York Times…
“If Prop. 40 goes down in California, I think it’s going to make, not all of the candidates, but it’s going to make a few of the 2028 candidates rethink how they slot that into their presidential policy agenda,” said Zach Moller, the senior director of the economic program at Third Way, a center-left think tank.
This is going to be one of the most important outcomes decided tomorrow. If it goes down to a solid defeat, we won’t have to hear about this for the next several elections. If it passes, this is suddenly going to be the obsession of every progressive heading into 2028. Just this once I’d like to see California voters do something sensible.
Editor’s Note: The Democrat Party has been infected by socialism, and it’s spreading FAST. Democrats are claiming there’s nothing to worry about, but we know the truth.
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