New forecasts show the state would lose far more than it gains.
The sponsors of a referendum in California to take 5 percent of the assets of all billionaires in the state said last week that they’ve submitted enough signatures to get their measure on the ballot in November.
Even if it ultimately fails, the specter of such a wealth tax has already cost the state more in lost future revenue from income taxes than it would raise.
New studies forecast a costly cascading effect, as family offices leave, philanthropy gets redirected to other states and start-ups choose to launch in less hostile environs.
The union sponsoring the initiative asserts that California is such a special place for its 200-plus billionaires that “it’s unlikely that a one-time emergency tax will motivate these folks to leave.”
Alas, reality already begs to differ. The billionaire exodus has accelerated, including big names like Larry Page, Sergey Brin, Mark Zuckerberg and Peter Thiel.
It’s hard to get an exact number on the departures, since many billionaires may be quiet quitting the state rather than slamming the door behind them on the way to Austin or Miami.
Steven Spielberg, for example, denies the billionaire tax had anything to do with his entirely coincidental relocation to New York City at the start of the year, but the timing sure was convenient, since the initiative specifies that the billionaire tax will be retroactively assessed on anyone residing in California as of Jan. 1.
Memo to California voters: If it is possible for a citizen of your state to lower their tax bill by moving to Manhattan, something has gone seriously wrong.
Ironically, timing the tax to the start of the year was supposed to make it harder for billionaires to avoid paying. Instead, this too-clever-by-half design forced them to jump the gun, even though doing it this way was almost certainly illegal and retroactive taxation would be challenged in court.
The Service Employees International Union has long abused the Golden State’s referendum process to extort concessions from employers and distort the economy for everyone else. Now the union has decided it wants to slaughter its golden goose.
That is not, of course, how the initiative is pitched. The union claims it only wants a one-time tax of 5 percent, including unrealized paper gains and equity stakes in start-ups that have yet to go public.
The ballot language requires that 90 percent of the infusion of revenue go toward health care, which would particularly benefit the approximately 120,000 members represented by SEIU’s United Healthcare Workers West affiliate.
Instead of acknowledging that their goal is redistribution of wealth, they pretend that the tax is needed to save California’s health system from “collapse” after tweaks in federal reimbursement formulas.
The measure’s sponsors claim it would raise roughly $100 billion. But California’s nonpartisan Legislative Analyst’s Office says the tax would probably generate “tens of billions.” It also warns of massive enforcement costs.
There’s a good chance the self-destructive initiative, currently polling a smidgen above 50 percent, will fail at the ballot box. But many of the state’s billionaires are understandably reluctant to gamble 5 percent of their net worth on the will of the voters in what’s shaping up to a be a wave election for Democrats, so they’ve preemptively departed.
This emigration will cost California’s state government somewhere between $3.5 billion and $4.5 billion every year in other tax collections, and up to $19 billion in lost GDP, according to new estimates from Jared Walczak, a visiting fellow at the California Tax Foundation.
Many Democrats understand this, which is why Gov. Gavin Newsom opposes the ballot measure. California’s best hope for keeping its tax base is for voters to reject the ballot measure so decisively that would-be wealth-taxers are afraid to ever try it again.