Joffe: The billionaire's wealth tax could break California
California is not only the home of innovative technology; sadly, it is also the home of innovative tax ideas. The latest bad new idea, says Marc Joffe of the California Policy Center in a CA Globe article, is a one-time billionaire wealth tax levied on a retroactive basis--which could have disastrous consequences for CA's already beleaguered budget.
Leading advocates for the tax are Clinton Labor Secretary Robert Reich and Professor Edward Saez, who is the Director of the Stone Center on Wealth and Income Inequality at UC Berkeley. Both have spent decades worrying about wealth distribution to the exclusion of thinking about how to grow the overall economic pie, so that we can all become wealthier.
The union sponsor is the Service Employees International Union (SEIU), which is a veteran of using California’s ballot initiative process to intimidate and punish its foes. In addition to threatening to place ballot measures to limit healthcare executive pay as a negotiating tactic, SEIU placed three successive ballot measures in 2018, 2020, and 2022 for the purpose of shaking down kidney dialysis providers such as DaVita and Fresenius. Editorialists and voters saw through the deception, causing all three initiatives to fail.
But now they have found a more attractive target: the roughly 220 billionaires residing in California in 2025. SEIU is sponsoring the “2026 Billionaires Tax Act”. The measure, recently listed on the Attorney General’s website, would impose a one-time 5% tax on individual wealth exceeding $1 billion.
Although the tax would be levied based on 2026 net worth, it would apply to billionaires who resided in California in 2025, so theoretically it could not be avoided.
Proponents assert that the measure would not cause billionaires to flee the state because of the one-time nature of the tax. Unlike federal wealth taxes floated by Bernie Sanders and Elizabeth Warren, the SEIU tax would not be applied each year.
But the flaw in this argument is obvious: if the state could impose a wealth tax once, it could do so again and again. So, yes, billionaires might well leave if this measure passes.
Proponents assume that the agglomeration effects of California’s tech and entertainment industries will be enough to retain the billionaires. But, as Elon Musk has already demonstrated, a tech entrepreneur can continue to build his wealth with an out-of-state domicile and corporate headquarters. California’s current wealth king, Larry Ellison, also has at least one foot out the door: Oracle headquarters is now in Austin, and he owns 98% of the Hawaiian Island of Lanai.
Further, the fact that Los Angeles’ entertainment industry agglomeration is breaking down has been widely reported and many of the California billionaires are in industries with no clear California concentration including private equity and financial services.
Since billionaires provide a disproportionate share of California’s general revenue thanks to the state’s 13,3% top marginal income tax rate, an exodus could prove to be a budget nightmare. The billionaire tax revenue would be placed in a special fund, 90% of which would be devoted to healthcare spending and the rest to K-12 education.
So, the tax provides no new general fund revenue, but when the billionaires leave, the state’s general fund will lose income tax revenue thereby exacerbating California’s structural budget deficit. The result will be pressure for more broad-based taxes and cuts to such general fund-supported priorities as law enforcement, corrections, and higher education.
Of course, that is less of a concern to SEIU. The new revenue will flow to healthcare providers that will in turn offer more jobs to SEIU members. They, in turn, will pay more dues to SEIU so that leadership can concoct the next ballot measure shakedown.
Read the whole thing here.
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