California voters will decide this November whether to enact a wealth tax that targets billionaires.
Money from the one-time 5% tax on the state’s billionaires would mostly go to health care.
Gov. Gavin Newsom has raised concerns that the tax would drive the state’s wealthiest residents out of California, doing long-term damage to the state’s tax base and stifling innovation.
Estimates vary about how much the tax would generate to supplement the annual state budget, which is currently $321 billion. Supporters say it would produce $100 billion over five years.
Question: Is a billionaire tax a good idea for California?
Economists
Caroline Freund, UC San Diego School of Global Policy and Strategy
NO: The super rich should pay more and health care needs investment, but a one-time billionaire tax earmarked for health care is the wrong tool. If billionaires leave California because of the tax, we lose the jobs and revenue that follow them. Designating the revenue for health care risks pushing up health care costs while crowding out public funding for schools, infrastructure and other services. And one-off taxes solve nothing long-term while undermining the predictability businesses and residents rely on.
James Hamilton, UC San Diego
NO: Billionaires contributed about $3 billion to California’s income tax receipts last year. But some of the richest have already left and more will follow if measures like this gain traction. Elon Musk became the world’s wealthiest man by building better electric cars and revolutionizing satellite communications. He used $400 million to develop Falcon 9, which is the primary way satellites are put into orbit today. The state of California used $15 billion to develop a high-speed rail that goes nowhere.
Norm Miller, University of San Diego
NO: A billionaire tax is a brilliant way to remind every wealthy resident that they may be the next target, while reminding everyone that Nevada and Texas have plenty of empty office parks and a pro-business mentality. California already struggles with affordability and out‑migration, but why not toss in a policy that practically gift‑wraps some of our most productive and innovative taxpayers for other states. Even seriously discussing this proposal will scare some residents away.
David Ely, San Diego State University
NO: Some billionaires will relocate to another state to protect their wealth, leading to lower future income tax revenues collected by California. Entrepreneurs may avoid California if they fear a wealth tax might be imposed again in the future. Assessing the value of private businesses and some other forms of wealth is extremely challenging. The state would have little flexibility in how the tax is used as most of the revenue must be spent on health care.
Ray Major, economist
NO: Billionaires are an easy target when it comes to raising additional taxes. But remember, the vast majority of California’s prosperity can directly be tied back to the innovation and hard work of people who created countless jobs and wealth in the state. If you tax billionaires, they will take their money and businesses elsewhere, jobs will leave with them, resulting in ordinary people suffering exponentially more in the process. This is a perfect example of cutting off your nose to spite your face.
Kelly Cunningham, San Diego Institute for Economic Research
NO: Just the threat of passing the tax convinced some billionaires to leave California, taking their income and business investment. Taxing wealth penalizes saving and investment, reducing capital for funding entrepreneurship, job creation and research. Projected tax collections will fail to materialize, further disincentivize innovation within the state and severely hinder economic prosperity. Like the original income tax passed in 1913, supposedly on only the wealthiest income earners, this would open the door to continual lower wealth redistribution.
Alan Gin, University of San Diego
NO: The goal of raising more revenue to help pay for health care is good. There is also a serious problem with inequality in this country. But it is too easy for individuals to move across state lines to avoid the wealth tax. That has negative implications for revenue from the income tax, which has helped with the state budget this year. A wealth tax would have to be at the national level, and even that might not work if people leave the country.
Executives
Bob Rauch, R.A. Rauch & Associates
NO: A billionaire tax sounds good on paper, but it is bad policy: it targets a tiny, mobile group whose wealth is mostly unrealized and easily relocated, guaranteeing volatile revenue and expensive legal battles. California doesn’t need another tax; it needs predictable, broad‑based fiscal discipline. This proposal risks driving investment out of the state while doing little to solve structural budget problems. It is a terrible idea.
Austin Neudecker, Weave Growth
NO: I support progressive taxation and strongly believe access to basic health care should be a societal and budgetary priority. However, a state-level wealth tax creates powerful incentives for capital flight and tax avoidance. California already grapples with high-net-worth residents who employ ever-changing schemes or relocate before major liquidity events. Wealth is often illiquid, forcing difficult valuations and potential asset sales. Progressive wealth taxation is best addressed at the federal level, where avoidance through relocation is more difficult.
Chris Van Gorder, Scripps Health
NO: While the tax on billionaires might poll well in California, the details matter. It would chase out of California those who use their resources to create jobs, further innovation and even provide philanthropy to many charities in our state. California’s tax philosophy is dangerously flawed as it is. These individuals already subsidize our state budget; we don’t want them moving out of state.
Jamie Moraga, Franklin Revere
NO: If you want to drive billionaires and their businesses out of California and weaken its tax base, this is how. The measure claims this tax will fund health care, but we’ve seen empty promises and redirected money before. The state lacks the ability to value, administer and manage this tax, and it’s likely to be tied up in litigation for years. It’s short-term thinking with no long-term plan. California should reduce taxes and regulations, not add them.
Mark Kersey, San Diego County Taxpayers Assoc.
NO: The wealthiest residents of our state have the greatest ability to take their wealth to other places. That mobility makes this effort to tax their assets (liquid or not) counterproductive, as they will not only take their wealth out of state, but also their income. This is not theoretical, as some have already done exactly that. Given how reliant Sacramento is on top earners’ income taxes, this measure is misguided and could result in lower overall revenue to the state.
Phil Blair, Manpower
YES: I question if any human needs to be worth more than $50 billion and not pay high taxes to help people in need. If a billionaire is willing to move out of California to avoid a tax on their extreme wealth, they probably would have moved out anyway. I do strongly support a national billionaire tax so that extremely rich people cannot avoid a tax by moving to other states.
Gary London, London Group Realty Advisors
NO: For perspective, taxing the rich has historically been floated during cycles of fiscal uncertainty. There is no reason to push the panic button. A 5% tax is not going to drain California of billionaires: the weather is too good. However, Gov. Newsom’s proposed national tax, dedicated to achieving a more proportional tax on the wealthy, and not an incentive for them to move state-to-state to avoid the tax, is a much better approach.
Have an idea for an Econometer question? Email me at phillip.molnar@sduniontribune.com. Follow me on Threads: @phillip020