Stuart Varney and Kelly Saberi discuss California billionaires’ tax proposal. Gubernatorial candidate Steve Hilton and California Business Roundtable President Robert Lapsley warn the measure could cause jobs to disappear from the state.
California voters are set to vote to determine the fate of a proposed billionaires tax that could see the Golden State lose wealthy residents and fail to provide the revenue advocates hoped for.
The ballot measure, known as Proposition 40, would impose a one-time 5% wealth tax on taxpayers and trusts with assets exceeding $1 billion and use the revenue to fund state health programs, public education and food assistance.
The tax would be payable over five years and assets covered would include businesses, securities, artwork, collectibles and intellectual property – although real estate, pensions and some retirement accounts would be exempt.
The threat of a wealth tax, which as written would apply retroactively to those who resided in California as of January 1, 2026, has caused some high-profile billionaires to leave the state or relocate their businesses — including Google co-founders Larry Page and Sergey Brin, Oracle founder Larry Ellison and PayPal co-founder Peter Thiel.
Max Levchin, billionaire co-founder of Affirm Holdings, told Bloomberg on Monday that he would “probably” leave California if voters pass the wealth tax.
Affirm CEO Max Levchin said he would “probably” leave California if the wealth tax passes. (John Lamparski/Getty Images)
“I love California. I think it’s beautiful,” Levchin said. “But the idea that popular opinion says, ‘Actually, we’re totally OK with asset seizure because we really, really need it,’ I just think is so wrong.”
Supporters of the billionaires tax argue that it would raise about $100 billion in revenue from the roughly $2.3 trillion in wealth held by the state’s billionaires by mid-2026, although recent analysis suggests the tax could permanently reduce the state’s tax base in the long term and with losses exceeding short-term revenue gains.
GOOGLE CO-FOUNDER RIPS CALIFORNIA BILLIONAIRES’ TAX: “I RUN FROM SOCIALISM”
California’s proposed billionaires tax would impose a one-time 5% levy on covered individuals and trusts. (Patrick T. Fallon / AFP via Getty Images)
Supporters argue that billionaires generally pay little in income taxes because they derive much of their wealth from investments, so the wealth tax would generate additional revenue even after accounting for some departures and reductions in income taxes paid in California by those who leave the state.
Gabriel Zucman and Emmanuel Saez, economists at UC Berkeley, co-authored a working paper with Jasper Boll of the Paris School of Economics that estimates that the wealth tax could raise about $100 billion over a five-year period with minimal impact on income tax revenues, since billionaires pay about $3 billion a year, representing 2.5 percent of the state’s income tax base. California.
“We estimate that this could raise around $100 billion, with relatively minor impacts on tax revenues,” the economists write in the working paper. “Using empirical estimates of mobility responses to the wealth tax, we find that an annual wealth tax on California billionaires could generate substantial additional revenue, even after accounting for income tax losses due to mobility.”
California entrepreneur warns billionaire wealth tax could trigger ‘giant sucking sound’ of corporate exits
California Gov. Gavin Newsom, a Democrat, has expressed opposition to the proposed wealth tax due to concerns that billionaires will leave the state. (Marijan Murat/photo alliance via Getty Images)
However, a working paper by two Hoover Institution economists, Joshua Rauh and senior fellow Benjamin Jaros, found that the announced departures reduced that tax base by about 30 percent and that estimated revenues would fall to between $28 billion and $36 billion after assuming 10 percent avoidance by those subject to the tax.
They also conducted a net present value (NPV) analysis of lost tax revenue from billionaires, estimated to contribute between $3.3 billion and $5.8 billion per year, and found that over time, this lost revenue more than offset the revenue received via the single wealth tax, with an estimated NPV of $38.9 billion.
It found that the NPV would be negative in about 85% of the simulated results, while it would be relatively low in about 15% of the results. A positive NPV suggests that value is created on a net basis, while a negative NPV suggests a net loss over the time horizon.
REAGAN ECONOMIST WARNS BILLIONAIRE TAX WILL ‘DESTROY’ CALIFORNIA
Google co-founder Sergey Brin is among the billionaires who have moved their assets out of state due to the ongoing proposed wealth tax. (Gilbert Flores/Variety via Getty Images)
“These results suggest that the Billionaires Tax Act will not fulfill the primary functions for which it was designed. Although the law was designed to raise revenues, behavioral reactions before the vote eroded most of the projected tax base,” Rauh and Jaros wrote in their working paper.
“Although the law was designed to address a fiscal emergency, its one-time collections are roughly offset – and in most scenarios more than offset – by the present value of permanently lost tax revenue,” the economists added.
CLICK HERE TO DOWNLOAD THE FOX NEWS APP
Economists at the Hoover Institution also noted that even if the billionaires tax is presented as a one-time measure, lawmakers could amend it with a two-thirds vote without consulting voters — giving policymakers the option to impose additional wealth taxes in the future.
Gn usa
