As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
As is the case with most election cycles, the claims and counterclaims about the ballot measures being voted on in California this time around are largely based on caricatures of the measures themselves.
That’s especially true of the highest-profile measure, Proposition 40 — the California billionaire tax.
What’s indisputable is that this is a “wealth tax.” It’s a one-time 5% levy on assets owned by Californians with more than $1 billion in net worth. That’s a departure from conventional state personal tax, which is levied on income such as wages and the proceeds from sales of stocks, bonds and other such financial assets.
All wealth tax revenue estimates, including our own, face inherent limitations.
— Joshua D. Rauh, Hoover Institution
Also indisputable is the scale of spending being mustered against the measure and its sources, which are mostly billionaires expecting to be charged the tax.
The leading contributor, as my colleague Queenie Wong has reported, is Google co-founder Sergey Brin, who claims to have moved out of the state, which might enable him to avoid the tax. Brin has contributed $102 million to Building a Better California, the group bankrolling two ballot countermeasures that would nullify Proposition 40 even if it garners a majority of votes.
Brin might even view his spending as value for money, since with a net worth estimated at $281 billion as of this week, according to the Bloomberg Billionaires Index, he could be liable for as much as $14 billion in wealth tax if he’s judged to have been a California resident as of last Jan. 1, leaving him with a mere $267 billion.
That pretty much exhausts the points of agreement between the pro- and anti-Proposition 40 camps. Everything else is the topic of contention, including how much money the tax would raise, whether it will prompt billionaires to leave California and whether passing Proposition 40 would trigger a tsunami of state tax increases.
What these questions have in common is that their answers are fundamentally unknowable. At some level, then, many people’s position on Proposition 40 isn’t a mathematical question but a political question.
The debate about the measure derives less from dollars and cents than on how one feels about the immense and growing economic disparity between the ultra-rich and everyone else, and what one thinks about the political power being exercised by people like Elon Musk.
The first problem we run into is that assessing the economic effects of the wealth tax is an exercise in conjecture. That applies to both camps in the debate, since no one can be sure how billionaires will react to the tax.
Perhaps the most dire estimate comes from economist Joshua D. Rauh of the conservative Hoover Institution. In an analysis published in March, he estimated that the tax would produce direct revenue of about $40 billion, well short of the $100-billion estimate of wealth tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley.
Rauh further estimates that, because departing billionaires take their personal income tax liability with them, depriving the state of as much as $5.8 billion in annual income taxes, the net present value of the wealth tax could be a negative $24.7 billion — in other words, a loss to the state over time.
“These responses are necessarily assumptions,” observes economist Jeffrey L. Hoopes of the University of North Carolina. “The exact magnitude cannot be known in advance — both author groups are predicting the future.” He says, however, that he finds Rauh’s analysis the more plausible.
Rauh’s estimate has been a centerpiece of the no-on-40 campaign. The opponents treat it as gospel, stating that the initiative “will cost $25 billion in lost revenue,” portraying Rauh’s speculative mathematics as established, empirical fact by leaving aside his own qualified calculations, which range from a net gain of $46.7 billion in present value to a net loss of $208 billion, with $24.7 billion as the “central scenario.”
I asked Rauh by email if he thought the campaign’s treatment of his estimates was proper; he replied that “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” Still, Rauh acknowledges in his own paper that “all wealth tax revenue estimates, including our own, face inherent limitations.” He says his estimate “should be understood as an informed range rather than a precise forecast.”
There are other grounds to question Rauh’s analysis. One is its institutional pedigree. When it comes to analyses of California politics and its economy, the Hoover Institution has a history of shooting first and trying to validate its points later.
In one example, the institution’s claim that California’s minimum wage law for fast-food workers had devastated the job market for those workers was tripped up by its failure to recognize the effect of seasonal adjustments in employment statistics. In another, its assertion that 96.5% of all California job growth from January 2022 through the first half of 2024 came from government jobs was based on a misreading of official data. The real figure was 22%; Hoover retracted that article. (Rauh wasn’t the author of either piece.)
Rauh lists 10 billionaires with a total net worth of $784.5 billion who are known or reported to have departed California, although some left well before the wealth tax was even on the drawing board and had already taken steps to relocate their residency out of California.
Rauh says that might be a substantial underestimate. He draws that assertion, however, from an article in the conservative Free Press by one Mike Solana, headlined “The Great California Wealth Exodus.”
A couple of points about that: First, Solana identifies himself in his Free Press bio as “mayor of San Francisco.” He’s not now and never has been. More to the point, he based his theme of a full-scale flight of billionaires on what he says were conversations with 21 billionaires, most of whom purportedly told him they were planning to leave the state and all of whom, he said, “were developing an exit plan.” But he didn’t identify any of them.
Rauh wrote that Solana conducted “on-the-record” interviews with his subjects, but I do not think that term means what he thinks it means. (Apologies to Inigo Montoya.)
Interviews with people who refuse to be identified are the opposite of “on-the-record.” Rauh told me by email that Solana’s purported interviews “are not part of the analysis” of the likelihood of billionaire flight. But that’s not how his reference reads. I couldn’t find a way to reach Solana through the Free Press, his X.com account or the Founders Fund or Pirate Wires, enterprises with which he’s associated.
The wealth tax opponents have applied the age-old technique of mustering superficially plausible, but largely imaginary, consequences of passage. Take the idea that the passage of Proposition 40 would presage a flood of more tax hikes.
It’s true that the initiative empowers the Legislature to make changes in the wealth tax, including applying it to sub-billionaires like you and me, or extending it beyond one year.
But it requires that any such changes be made through a vote of two-thirds of the members of each legislative chamber. That’s the same requirement applied to any changes in California taxes, so the initiative doesn’t give lawmakers any authority to enact new taxes that they don’t already have.
The opponents also assert that the initiative taxes retirement accounts “for the first time.” But that’s grossly misleading. The measure specifically exempts pensions and most individual retirement accounts from the tax, with the exception of Roth IRA and other Roth-type accounts worth $10 million or more — a balance compiled almost exclusively by the 1%.
Opponents are right in arguing that even if it’s passed, the wealth tax won’t face clear sailing administratively or legally. Identifying and valuing taxable wealth will challenge the state’s tax authorities. Critics say its retroactivity makes it vulnerable to court challenge on constitutional grounds — it applies to billionaires residing in the state as of Jan. 1, 2026, though their net worth would be calculated as of Dec. 31, 2026.
Although dominated by Democrats, the California Legislature has hardly embraced a wealth tax, even for the ultra-rich. Otherwise, it might not have been necessary for the tax to be placed on the ballot by Service Employees International Union-United Healthcare Workers West, which proposed it to help fill the budget gap in healthcare programs created by the Republican Congress’ budget bill last year.
Moreover, some of the state’s most important political leaders oppose Proposition 40, including Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited. Other unions have been decidedly cool to the measure, leading to a nasty outbreak of finger-pointing within the state’s organized labor ranks, as my colleagues Seema Mehta, Nicole Nixon and Taryn Luna reported.
So how should ordinary voters think about Proposition 40? If you think billionaires have too much money and are using it to make life harder for non-billionaires, you might look kindly on the measure. If you’re all right with the enormous expansion of the wealth of the ultra-rich, maybe not. But this isn’t a dollars-and-cents calculation so much as a political judgment. And aren’t elections all about politics?
