California proposal for one-time 5% tax on billionaires draws strong pushback

California is facing a backlash from its richest residents after a proposed one-time 5 percent tax on the state’s wealthiest prompted some billionaires to move assets or relocate. Google founders Sergey Brin and Larry Page moved assets out of the state, venture capitalist David Sacks opened an office in Texas, and Peter Thiel donated $3 million to a campaign opposing the proposal, which supporters are trying to place on the November ballot.

Governor Gavin Newsom has vowed to fight the measure. The debate comes amid a dramatic rise in billionaire wealth: Forbes counted 140 billionaires in 1987 and more than 3,000 last year, and Elon Musk is estimated at some $700 billion. The article notes that income taxes often do not capture much of the very richs wealth because it is held in stock and other assets that generate little taxable income; the effective tax rate on the 400 wealthiest Americans was 23.8 percent from 2018 to 2020, compared with 30 percent for the average taxpayer.

Many Western European countries once taxed net wealth but largely scrapped those levies because they were costly to administer, hard to value and raised comparatively little revenue, in part due to exemptions. Economist Gabriel Zucman told the author that a simple, flat tax narrowly focused on the superrich could address past design flaws.

Key Topics

Politics, California Wealth Tax, California, Gavin Newsom, Sergey Brin, Larry Page