With more than double the amount of signatures needed to get on November’s ballot, the Billionaire Tax Act will officially be up for consideration this November.
Indeed, roughly 1.6 million signatures have already been submitted, marking a profound accomplishment for the proposal’s progressive backers who have long pushed for such a policy.
The tax, which would target billionaires with a 5% levy on their net worth, is supposedly a means to bring funding back to healthcare, public education, and food assistance programs intended for middle-class and low-income Californians.
And while that may sound good on paper – as many left-wing populist policies initially do – the lasting damage it will bring upon California’s economy is certainly not worth a one-time addition to revenues.
To be sure, as it is designed, the tax is a one-time levy, meaning that either California will only see a singular, fleeting benefit, or the Golden State will be forced to adopt one of two changes, neither of which are beneficial for California in the long term.
First, California could renew the tax every year, cementing the state as inhospitable for the wealthy, many of whom will simply leave – which many billionaires have – or choose not to establish businesses in California at all.
The second choice, related to the first, is that as more and more high net-worth individuals flee the state, California could expand the definition of “ultra-wealthy” from its original $1 billion.
Such is the problem with many far-left policies: eventually, government runs out of billionaires to tax, thus it moves to millionaires and so on.
Taken together, it’s clear that the measure is ill-conceived and, if it passes, will be detrimental to California in more ways than one.
Most urgently, the wealthy have already begun looking for the exit door: according to California Tax Foundation’s Jared Walczak, reported departures have surpassed $750 billion and could soar to $1.2 trillion, by his estimate.
Among these recently-departed billionaires are Google co-founders Sergey Brin and Larry Page, PayPal’s Peter Thiel, and Meta CEO Mark Zuckerberg – all of whom have moved to Florida, which will undoubtedly benefit at California’s expense.
Predictably, as billionaires continue to leave California as a response, the less wealth there is to actually be taxed.
Per Stanford University’s Hoover Institution, the six billionaires who have already fled the state took with them nearly 30% of the wealth proponents expected to tax, which alone means the measure will only raise $40 billion of the $100 billion initially forecasted.
In other words, over time, the tax will end up costing California more revenue than it raises due to out-migration and slower economic growth, as Walczak argues.
Further, the tax disincentivizes success, weakens California’s standing as a hub for innovation, and demonizes the wealthy – all of which erode investment, drive economic activity elsewhere, and are ultimately incompatible with America’s capitalist roots.
Now, as the measure advances, gubernatorial candidates will have little choice but to take a clear stance on the tax, if they have not already.
Former Biden official Xavier Becerra – who has seen a recent surge in polling following Eric Swalwell’s exit from the race – is opposed to the tax, much as current Gov. Gavin Newsom is.
For his part, Becerra supports extending existing measures like Propositions 30 and 55, both of which call for much smaller tax increases on a larger share of citizens.
Even former Rep. Katie Porter, initially hesitant to take a firm position, has come down against the measure, arguing that while the wealthy should be held accountable, this tax in particular is not the right approach.
“No one in this race has fought harder to make the ultra-rich pay their fair share. In Congress, I strongly supported efforts to raise taxes on billionaires,” she said.
Porter continued, “However, I have real concerns about this specific proposal because it could end up hurting our ability to fund other key priorities like education and food assistance and make it harder to sustainably fund California’s needs.”
Then there is Tom Steyer, who has solidified a place among the top contenders. A billionaire himself, Steyer vocally supports the proposed tax, albeit he has cited concerns about its design and implementation.
San Jose Mayor Matt Mahan, one of the more moderate gubernatorial candidates, has been very vocal about his opposition to the tax, warning that the measure would ultimately cost the majority of Californians and sink the state’s innovation economy.
To be clear, there is no denying that states – especially California – must find ways to cover their budget gaps, yet the Billionaire Tax Act is far from the best way to address them.
Rather than raising taxes in a way that actually harms their local economies, governments should focus on controlling excessive spending and closing loopholes to ensure more residents pay what they owe.
Otherwise, spending pressures will persist and states will be tempted to lower the threshold of the “ultra-rich” to capture more revenue – further discouraging success.
Ultimately, it’s clear that the Billionaire Tax Act has created a growing divide within the Democratic Party – and it’s coming to a head right here in California.
Should progressives prevail, the state risks an exodus that could erode its tax base, slow innovation, and undermine the very programs the policy aims to support.
Conversely, if the tax does not pass come November, California has a chance to reset and prove that moderation – not populism – can still win at the ballot box.
Douglas Schoen is a longtime Democratic political consultant.