Even while many Americans struggle with the cost of living, a proposed tax on California’s wealthiest people is loaded with controversy. The proposal would see a one-time 5% tax levied on California residents whose net worth exceeds $1.1 billion. But the proposal, which could potentially be on the state’s ballot during the November midterms, has led to infighting within both political parties and included California Gov. Gavin Newsom (D).
‘It will reduce investments’
Opponents of the proposed billionaire tax argue that it would cause the ultrawealthy to flee the state, thereby eliminating economic growth in California. Billionaires and their allies are “blowing rhetorical gaskets,” claiming that the tax would “lead to the financial ruin of California, the obliteration of Silicon Valley and possibly even the end of capitalism as we know it,” said The Boston Globe. Many also feel the “deep concern over this potential ballot measure is about more than the ultrawealthy having to hand over some of their stash.”
There is a “real question about how states that expanded Medicaid, America’s health-insurance scheme for the not-so-well-off, will cope with cuts” implemented by President Donald Trump’s Big Beautiful Bill legislation, said The Economist. But in a state with as many billionaires as California, attempting to “solve the problem with a one-time wealth tax could imperil the state’s general fund in the long term.”
While nearly all Republicans are against the tax, Newsom, a potential 2028 presidential contender for the Democrats, is also opposed. The billionaire tax will “reduce investments in education,” Newsom told Bloomberg Businessweek. “It will reduce investments in teachers and librarians, child care. It will reduce investments in firefighting and police.” Despite acknowledging that many people want to see billionaires pay more in taxes, the proposal would have an “impact as it relates to the flow of capital, the impacts on the market, which are not inconsequential.”
‘Billionaires aren’t going to flee California’
Some say that the billionaire tax is a good idea that wouldn’t incentivize most of the ultrawealthy to leave the state. People like Google co-founders Sergey Brin and Larry Page have been “warning that a possible wealth tax would scare off more tech moguls like them,” but they “represent the exception to the rule of a largely settled corner of economics,” said CalMatters. Business leaders like the Google co-founders “amass vast fortunes without paying taxes to begin with,” so “good riddance. It’s not like Google is leaving Mountain View.”
Others reject the “argument that wealth taxes are doomed to fail because they have been repealed in many countries such as France, pointing instead to successful, sustained models in Switzerland and Spain,” said Fortune. There needs to be a change because capitalism “doesn’t seem to be working well,” Brian Galle, a tax law expert and the man behind the billionaire tax proposal, said to Fortune. Capitalism is a “great system that probably has, you know, enriched the lives of billions of people, but I’m not sure that our system is a functioning capitalist system right now.”
Even some who would be affected by the tax have no problem with it. “We chose to live in Silicon Valley, and whatever taxes I guess they would like to apply, so be it. I’m perfectly fine with it,” Nvidia CEO Jensen Huang, the world’s ninth-richest person, told Bloomberg. “I’ve got to tell you, I have not even thought about it once.”
Californians worth more than $1.1 billion would pay a one-time 5% tax
