California’s Wealth Tax Boomerang

The history of wealth taxes is that they raise much less revenue than hoped as targeted taxpayers find ways to avoid them. That looks to be the case with California’s wealth tax ballot measure (Proposition 40), which a new paper by the Hoover Institution’s Joshua Rauh and Benjamin Jaros estimates will result in a net revenue loss of $38.9 billion.

The SEIU United Healthcare Workers West and its friends are selling Prop. 40 as a “one-time” 5% tax on the wealth of residents with more than $1 billion in net worth. They claim the tax will raise $100 billion in revenue from 200 billionaires. This is a risky gamble that may backfire, as the Hoover paper explains.

Seven billionaires with $539.9 billion in wealth moved out of California between the initiative’s filing last autumn and the date at which residency would be determined for purposes of assessing the tax (Jan. 1, 2026), according to public reports. That means nearly 30% of Prop. 40’s estimated $1.9 trillion potential tax base has already disappeared.

Other billionaires may have moved out of the state this year and may still avoid the tax if it passes, since courts might strike down its retroactive application. The economists identify at least eight Prop. 40 legal vulnerabilities, including its assessment of a taxpayer’s worldwide assets and dubious valuation methods for non-publicly traded assets.

What are the chances Prop. 40 survives all legal challenges? Slim. The economists in their analysis take into account the risk that some or all provisions of Prop. 40 get overturned. This would further shrink the potential tax base.

The state will also lose annual income tax payments from billionaires who leave. The Hoover economists estimate that the state’s billionaires pay...

Unlike other groups that are less mobile billionaires can pretty much live anywhere they want. California for all its nice weather and scenery isn’t that big an allure put up against the rest of the world. A place run by morons however nice is a negative in the grand scheme of things.

The logical extension of cloward-piven stragegy of societal destruction leading to easy communist/socialist take-over?

I wish I knew the answer; however, the evil strategy is one to keep in mind and in the popular dialogue.

(It's much, much less likely to work if everyone knows about it.)

I agree, but Free Republic is the only place I hear of the “Cloward-Piven” strategy.

I like to think of it as the, “Gig is Up and I hope I don’t Get Caught”, strategy.

For Cali, it’s the, ”China is paying the bills”, strategy.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.