Dem
47
GOP
53
Billionaires are not terribly popular right now, and California is ground zero for going after them. There is a ballot initiative that would impose a one-time tax of 5% on the wealth of the state's billionaires. Needless to say, the billionaires are opposing it with everything they have, which is—guess what—money. A recent poll, however, has the tax ahead 50% to 37%. The argument for it is that billionaires don't pay enough tax and the state can use the money to help people. The argument against it is that taxing billionaires will make them flee to the greener pastures of central Texas. There is still time for plenty of negative ads and they will come, believe us. Billionaires take this very seriously.
Democratic leaders are split. Gov. Gavin Newsom (D-CA) opposes the tax while Bernie Sanders supports it. OK, Sanders isn't technically a Democrat, but he caucuses with them. Rep. Ro Khanna (D-CA) represents Silicon Valley, where many billionaires live, and he supports the tax and he is an actual Democrat.
A big question is: Will this tax, or any wealth tax, cause billionaires to flee the state? First of all, the tax applies to anyone who was a resident of the state on Jan. 1, 2026, so moving now does not avoid the tax. Looking at future wealth taxes, while billionaires like to threaten to move and certainly have the ability to buy a nice house anywhere they want, will they really do it? In many cases, their friends and family and business associates are in California. Will they leave them all to save some tax money? And is that so bad? Do billionaires pay much in the way of income taxes? Many of them pay almost nothing because they take little salary and get stock options which they use as collateral to borrow money to live well on. Also, if high taxes are anathema to billionaires, why haven't they already left for Texas since California has higher taxes all across the board—capital gains taxes, estate taxes, and the whole lot. Also, for billionaires who own companies in Silicon Valley, being there is valuable because there is a whole ecosystem there not present in Texas or Florida, including suppliers, customers, partners, venture capitalists, start-up-friendly banks, and more. Are company owners really prepared to leave all that because Florida has lower taxes and warmer beaches, or are they just bluffing? Wealth taxes are common in Europe and not that many wealthy Europeans have moved to Texas.
Some people have argued that taxing the rich is fine, but this is the wrong tax. The focus should be on capital gains taxes and estate taxes. The latter is in fact a wealth tax rather than an income tax and it is less objectionable to many billionaires since they won't miss the money after it is collected. (V)