Taxation is theft, libertarian thinkers have long asserted, and Proposition 40 on the November ballot contains nothing that proves them wrong.
The measure known as the Billionaire Tax Act would amend the state constitution to override existing limits on taxing and spending in order to make possible a one-time, 5% tax on the wealth of Californians with a net worth of more than $1 billion.
The proceeds from the tax would be directed into a special fund, and 90% of the revenue would have to be spent on health care services.
Unsurprisingly, the backer of this measure is a union of health care workers who provide those services.
The Service Employees International Union-United Healthcare Workers West (SEIU-UHW) has a long history of filing initiatives as bargaining chips for negotiations to advance the interests of the union.
This includes initiatives to limit the pay of hospital executives, cap prices at clinics, and tax a hospital in the L.A. County city of Lynwood. Another such measure from the union targeting community health clinics it wants to unionize, Proposition 44, is also on the ballot this November.
Despite spending more than $40 million on such campaigns through 2020, there were “no wins on the ballot,” CalMatters observed, though union president Dave Regan said the efforts made progress in other ways as he worked to expand membership in his union.
If the Billionaire Tax Act was intended as a bargaining chip to be withdrawn later, things didn’t work out as planned. It’s on the ballot and it might pass, doing serious damage to California’s budget, economy and job creation for years to come.
SEIU-UHW says the tax will bring in $100 billion to fill the hole the union believes the federal government has created with “cuts” to health care funding. However, economists at the Stanford University-based Hoover Institution caution that after accounting for billionaires who have already left and the long-term repercussions of more of them leaving, Prop. 40’s one-time wealth tax would not only collect less than the $100 billion hoped for, but in the long-run would reduce tax revenues as billionaire investors take their money elsewhere.
Prop. 40’s supporters say these warnings are mere propaganda. But consider the experience of other countries that have attempted wealth taxes. Consider a 2018 report from the Organisation for Economic Co-operation and Development, a multinational organization representing 38 developed nations. The OECD notes that while 12 OECD member countries had wealth taxes on the books in 1990, by 2017 that number plummeted to just four. Revenues from net wealth taxes, it turned out, “have also, with a few exceptions, been very low.”
Consider also the message that passage of Prop. 40 would send to not only current but future entrepreneurs and innovators. Allowing a cynical union to pilfer the wealth of California’s most successful entrepreneurs would have a chilling effect on investment. California may have nice weather, but Prop. 40 risks making the tax and business climate even less hospitable.
Another concern is the inevitable demand for more. The money from the one-time tax will run out within five years. Proposition 40 empowers the Legislature to change the Billionaire Tax Act with a two-thirds vote in each house. Beyond that, the Legislature could enact a much broader wealth tax once the mechanism for collecting it is established.
Regardless of where one sits on the political spectrum, there’s very little to like about this measure and plenty to worry about. It’s an aggressive money grab that could sink California’s progressive budget. It pursues short-term aims despite the long-term consequences. And it comes from the same obnoxious union that repeatedly attacked dialysis clinics and is now threatening community health clinics with closure if Prop. 44 passes.
Proposition 40 is a reckless tax proposed by a special interest group that wants to obtain funding to benefit its members. Vote no.