Two teams of economists studied the same one-time wealth tax and reached opposite answers, which is the best argument against it.
SAN FRANCISCO, California (Surf Revolt) – When two sets of respected economists study the same California tax and one finds it will raise about $100 billion while the other finds it will lose the state $39 billion, the honest conclusion is that nobody knows what Proposition 40 will do. That uncertainty is the heart of the case against the billionaire tax, and it deserves more attention than the slogans on either side of the ballot fight.
What Proposition 40 does
An NPR report by Greg Rosalsky, published by KJZZ on November 2, describes the measure as a one-time 5 percent tax on the net worth of billionaires, with some assets exempt. It is retroactive: it applies to billionaires who were California residents on January 1, 2026. Unlike France’s former wealth tax, it reaches business holdings, including shares in companies that billionaires run. It includes deferral provisions for illiquid wealth and fallback provisions in case courts strike down parts of it. The revenue would go mostly to health care for low-income Californians, to offset federal Medicaid cuts.
The measure was backed by the union SEIU-UHW, according to an InvestmentNews analysis from January, which said taxpayers would have five years to pay and that Governor Gavin Newsom opposes the measure.
Two answers from the same data
The NPR report lays out the dispute. Gabriel Zucman, Jasper Boll and Emmanuel Saez argue the tax could raise about $100 billion with comparatively minor effects on income tax revenue. They started from 5 percent of $2.3 trillion in billionaire wealth as of mid-2026, then cut projected revenue by 10 percent to allow for avoidance, evasion and early exits.
Joshua Rauh and Benjamin Jaros reach the opposite result. They say the state loses $39 billion in expectation. In their analysis, billionaires who left California before the cutoff, at least seven of whom they name, reduce potential revenue by roughly $30 billion. They then halve the remainder to account for legal uncertainty, leaving about $30 billion from the tax itself, and subtract the future income tax payments the state would lose from billionaires expected to depart. Zucman disputes that last step.
- Supporters’ estimate: about $100 billion in revenue
- Critics’ estimate: a net loss of $39 billion to the state
- Tax rate: one-time 5 percent of net worth
- Residency test: billionaires living in California on January 1, 2026
- Intended use: mostly health care for low-income Californians
Reason ran the critics’ number in a piece headlined California’s wealth tax could cost the state $39 billion, and followed with an essay arguing that France is a warning to the tax-the-rich crowd.
The exit question
A tax that triggers on residency is a tax people can dodge by leaving, and the reporting shows some may have. Cybernews, in a look at how Silicon Valley billionaires are weighing exit strategies, reports that Mark Zuckerberg reportedly threatened to leave California over the tax but later reached a deal with Meta under which he will stay, that Jeff Bezos and Howard Schultz reportedly chose Miami for tax reasons, and that Nvidia chief Jensen Huang says he has no plans to leave and is willing to pay billions in California taxes. It also cites a paper by two Stanford academics finding that more billionaires left California than expected, and concluding that the tax could be a net negative. Oxfam, in the same report, says California’s 246 billionaires saw their combined wealth rise 31 percent between March 2025 and March 2026, to $2.061 trillion.
That last number is the supporters’ best talking point. A pool of wealth that large invites a claim on it, and supporters can fairly ask why a state with such fortunes should absorb Medicaid cuts. We take the argument seriously. But the same fact cuts the other way: much of that wealth is likely held in company shares, and taxing holdings that have not been sold can force owners to sell, borrow or leave.
Why liberty-minded Californians should object
There are three problems that survive whichever economist is right. First, retroactivity. A rule that reaches back to a date before the voters voted tells every business owner that the law can be rewritten against them after the fact. Contracts and long-term investments depend on the opposite expectation.
Second, the revenue is one-time while the spending it funds is not. Health programs, once created, become permanent commitments, and a state budget that treats a single payment from a tiny group as a funding source has chosen volatility. Rauh and Jaros count lost future income tax from departing billionaires, and even if the departures are fewer than the critics fear, the loss would recur year after year.
Third, a tax on net worth is a tax on a person’s holdings whether or not they were sold, and valuing private business shares is a matter of estimation and dispute. That invites exactly the litigation that Rauh and Jaros price into their estimate, and which InvestmentNews says billionaires’ lawyers have warned will be protracted and expensive. Attorney Alex Spiro, who represents billionaire clients, is the one quoted warning of it. The measure’s own fallback provisions concede that some of it may not survive in court.
The surfer’s test
Surfers know the break that is easy to see from the beach is not always the break that holds. Prop 40 looks like a clean lineup on the spreadsheet: tax the very rich, protect health care for the poor. In the water, the set breaks differently, and everyone downstream gets caught. Spending restraint, lower general taxes and a state that makes housing and business cheaper would help the low-income Californians the tax claims to serve, without making the case that a government can only be funded by hunting the people who have the means to move.
Voters decided the measure on November 3. We have not verified the tally, and this analysis does not report it. The economic argument holds regardless. For California and the rest of America, with jokes, there is always Bohiney Magazine.
SOURCE: https://bohiney.com/