Promoting this tax only in California is a mistake. It’s better to organize so that this idea takes root nationwide.
Proposition 40, which California voters will vote on November 3, is both a constitutionalamendment and a state law. It is a ballot measure currently in effect only in California andColorado. The idea is to make it difficult to repeal.
The ballot states that “One vote in favor supports this initiative to impose a one-time 5% taxon the accumulated wealth of taxpayers and trusts that own taxable assets valued at morethan one billion dollars.”
The Proposal aims to correct a distortion in the tax system: the richer a person is, the less tax they pay as a percentage of their income.
Who would be against those most favored by circumstances, those who accumulated often ungraspable fortunes, paying the tax authorities what they should pay?
The voters should be against it. This law should be passed at the national level, not just forCalifornia, but for all states and territories. They should pay what they owe.
But promoting this proposed law for one state during this campaign is counterproductive, naive, and impractical. If passed, it will only cause the state’s billionaires, some 200 of them, to relocate. And that’s it. Their current California tax revenue would vanish. That extra 5%would disappear.
They will move their operations center to states with no income tax, stock sales tax, or investment tax, such as Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, or Wyoming.
According to an analysis by the Hoover Institute at Stanford University – yes, the conservative one – if Proposition 40 is passed, the state will lose $25 billion instead of gaining it.
The financial analysis of Proposition 40 conducted by the state’s Legislative Analyst’s Office (LAO) takes a completely different approach, and while it does acknowledge a loss of one billion, it does not use the same parameters.
Support for the proposal among unions is mixed. At its convention, the California AFL-CIO endorsed the proposal, but the California Teachers Association, with its 300,000 members, opposes it, and the California SEIU State Council—with 700,000 members—remained neutral, even though one of its local chapters authored and primarily sponsored the motion, as Harold Meyerson explains in a column in the American Prospect. We should add that the California Medical Association, with its 50,000 physicians and medical students, also opposed it.
Proposition 40 is a bad idea. We must strive to demand more from immigrants across the country. Doing it in just one state encourages them to migrate.
The amount, or proportion, of the tax in Proposition 40 is relatively small: a one-time paymentof 5% of accumulated wealth to fund state healthcare programs. But its small size does littleto reassure those being asked to contribute. It only raises suspicions that it will be repeated.
And yes, that’s clearly stipulated in the text of the proposal. The Legislature—yes, with aspecial two-thirds majority—can renew the tax, expand it to include other population groups.And regarding the clause that says the change must “be consistent with and promote thepurposes,” who decides that consistency?
In short: it’s not worth wasting money and effort promoting a motion that won’t produce the desired results. It’s better to organize and join with other states, their legislatures, governorships, and Congress so that this idea can take root at the national level.
Governor Gavin Newsom and the leading candidate to replace him in this election, Xavier Becerra, oppose Proposition 40. Newsom stated on his Substack account: “You may not be able to simply move to Texas or Florida to protect your income from taxes, but I assure you that billionaires can, and they do. Wealth is mobile and seeks the state with the lowest taxes. The battle must be fought at the federal level, which is where this flawed system was originally created.”
You’re right.