The billionaires’ wealth tax: a catastrophe for California?

“Nothing brings tech titans together like taxes,” said Margaux MacColl in The San Francisco Standard. And right now, the moguls are united in rage about a mooted wealth tax in California, which, they warn, could destroy Silicon Valley’s startup ecosystem and lead to the next great tech company being built in China.

The ballot initiative, proposed by a healthcare workers’ union, will be put to a vote in November, provided it secures the requisite number of signatures. If passed into law, it would impose a one-time, 5% levy on the assets of California residents with a net worth above $1bn: about 200 people. The tax would raise an estimated $100bn, which would be placed in a special fund, with the proceeds going towards healthcare and education. Venture capitalist Peter Thiel and Google co-founder Larry Page are among the billionaires preparing to change their official state residency in response to the proposal, said The New York Times.

‘The money could make a real difference’

Spare me the oligarchs’ whiny protests, said Paul Waldman on Substack. Larry Page stands to lose some $13bn under this measure. That’s “a lot of money”, but it’s almost nothing to him: he regularly loses or gains that much over a matter of days as a result of the movements of the stock market. And remember, he and other tech moguls are “exponentially richer than they would otherwise have been because of California” and its unique position as a hub for innovators, entrepreneurs and investors. The money could make a real difference. And I confidently predict that the moguls will survive being left with just “95% of more money than anyone could spend in a hundred lifetimes”.

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‘Progressives will come back for more’

Like it or not, wealth is mobile these days, said The Washington Post, and California’s taxes are “already sky high”. In 2012, the state increased the marginal tax rate on high-income households by 3%, as a “temporary measure”. It later extended it to 2030. If the new wealth tax is adopted, it won’t be a one-off. Progressives will come back for more.

“California’s real fiscal problem is that revenue can’t keep pace with Democratic spending,” said The Wall Street Journal. The wealth tax will only make its deficit bigger, by driving out the top 1% who pay half of the state’s income tax. The Democratic governor, Gavin Newsom, seems to be aware of this: he opposes the wealth tax. But if the vote goes ahead, he’ll have a difficult choice between economic good sense and “the California Left”.