{"id":149869,"date":"2026-01-26T11:29:12","date_gmt":"2026-01-26T11:29:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ca\/149869\/"},"modified":"2026-01-26T11:29:12","modified_gmt":"2026-01-26T11:29:12","slug":"is-californias-proposed-billionaire-tax-smart-policy-history-holds-lessons","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ca\/149869\/","title":{"rendered":"Is California’s proposed billionaire tax smart policy? History holds lessons"},"content":{"rendered":"\n

In the roiling debate over California\u2019s proposed billionaire tax<\/a>, supporters and critics agree that such policies haven\u2019t always worked in the past. But the lessons they\u2019ve drawn from that history are wildly different.<\/p>\n

The Billionaire Tax Act, which backers are pushing<\/a> to get on the November ballot, would charge California\u2019s 200-plus billionaires a one-time, 5% tax on their net worth in order to backfill billions of dollars in Republican-led cuts to federal healthcare funding for middle-class and low-income residents.<\/p>\n

Critics of the proposal have argued that past failures of similar wealth taxes in Europe prove they don\u2019t work and can cause more harm than good, including by driving the ultra-rich out. Among those critics is San Jos\u00e9 Mayor Matt Mahan, a tech-friendly Democrat who is contemplating a run for governor.<\/p>\n

\u201cOver the last 30 years, we\u2019ve seen a dozen European countries pursue national-level wealth taxes,\u201d Mahan said. \u201cNine of them have rolled them back. A majority have seen a decline in overall revenue. It\u2019s actually shrunk the tax base, not increased it, and it\u2019s because it creates a perverse incentive and drives capital flight.\u201d<\/p>\n

Backers of the measure acknowledge such failures but say that they learned from them and that California\u2019s proposal is stronger as a result.<\/p>\n

Brian Galle, a UC Berkeley tax law professor and one of four academic experts who drafted the measure, said if it gets on the ballot, every voter in the state will receive a copy of the full text, a one-page explainer on what it does, and nearly two dozen additional pages of \u201crules for preventing wealthy people and their army of lawyers from dodging\u201d it.<\/p>\n

Many of those rules, he said, are based on historical lessons from places where such taxes have failed, but also where they\u2019ve succeeded.<\/p>\n

\u201cIf you understand the actual lessons of history, you understand that this bill is more like the successful Swiss and Spanish wealth taxes,\u201d Galle said. \u201cPart of that is learning from history.\u201d<\/p>\n

Warnings from Europe<\/p>\n

Since the 1990s, several European countries have repealed net wealth taxes, including Austria, Denmark, Finland, France and Germany.<\/p>\n

A major example cited by critics of the California proposal is France, which implemented a much larger wealth tax on far more people, including many millionaires. The measure raised modest revenues, which fell as rich people moved out of the country to avoid paying, and the measure was repealed by the government of President Emmanuel Macron in 2017.<\/p>\n

In a 2018 report<\/a> on net wealth taxes, the Paris-based Organization for Economic Co-operation and Development found that European repeals were often driven by \u201cefficiency and administrative concerns and by the observation that net wealth taxes have frequently failed to meet their redistributive goals.\u201d<\/p>\n

\u201cThe revenues collected from net wealth taxes have also, with a few exceptions, been very low,\u201d it found.<\/p>\n

Critics and skeptics of the California proposal say they expect California to run into all the same problems.<\/p>\n

Mahan and others have pointed to a handful of prominent billionaires who already appear to be distancing themselves from the state<\/a>, and said they expect more to follow \u2014 which Mahan said will reduce California\u2019s \u201crecurring revenue\u201d beyond the amount raised by the one-time tax.<\/p>\n

Kent Smetters, faculty director of the Penn Wharton Budget Model, which analyzes the fiscal effects of public policies, said net worth taxes in other countries have \u201calways raised quite a bit less revenue than what was initially projected,\u201d in large part because \u201cwealth is easy, as it turns out, to try to reclassify or move around\u201d and \u201cthere\u2019s all these tricks that you can do to try to make the wealth look smaller for tax purposes.\u201d<\/p>\n

\"A <\/p>\n

A bus in London promotes a campaign by British millionaires advocating for an end to extreme wealth and inequality.<\/p>\n

(Carl Court \/ Getty Images)<\/p>\n

Smetters said he expects that the California measure will raise less than the $100 billion estimated by its backers because billionaire wealth in California \u2014 much of it derived from the tech sector \u2014 is relatively \u201cmobile,\u201d as many tech barons can move without it affecting business.<\/p>\n

\u201cPolicymakers have to understand that they\u2019re not going to get nearly as much money as they often project from a purely static projection, where they\u2019re not accounting for the different ways that people can move their wealth, reclassify their wealth, or even just move out of the state,\u201d Smetters said. \u201cSo far, we only know of a few people \u2014 with a lot of money \u2014 who have moved out of the state, [but] that number could go up.\u201d<\/p>\n

Kevin Ghassomian, a private wealth lawyer at Venable who advises rich clients, said he expects the administrative costs of enforcing the tax to be massive for the state \u2014 and much greater than the drafters have anticipated.<\/p>\n

On the front end, the state will face a wave of legal challenges to the tax\u2019s constitutionality and its retroactive application to all billionaires living in the state as of the end of 2025.<\/p>\n

Moving ahead, he said, there will be litigation from wealthy individuals whose departure from California is questioned or who dispute the state\u2019s valuation of their net worth or individual assets \u2014 including private holdings, which the state doesn\u2019t have extensive experience assessing.<\/p>\n

Valuating such assets will be \u201ca nightmare, just practically speaking, and it\u2019s going to require a lot of administrators at the state level,\u201d Ghassomian said, especially considering many California billionaires\u2019 wealth is in the form of illiquid holdings in startups and other ventures with fluctuating market valuations.<\/p>\n

\u201cYou could be a billionaire today, and then the market plummets, and now all of a sudden, you\u2019re a pauper,\u201d he said. \u201cIt could really lead to some unfair results.\u201d<\/p>\n

Lessons from Europe<\/p>\n

Backers of California\u2019s proposal said they have accounted for many of the historical pitfalls with wealth taxes and taken steps to avoid them \u2014 including by making it harder for wealthy Californians to simply shuffle money around to avoid the tax.<\/p>\n

\u201cThere are a lot of provisions that are designed based on what has worked well in other countries with wealth taxes in the modern era, especially Switzerland, and there are also provisions meant to shut down some of the holes in some of the earlier wealth tax efforts, especially the France one, that were viewed as not successful,\u201d said David Gamage, a University of Missouri tax law professor and another of the proposal\u2019s drafters. <\/p>\n

Galle said the Organization for Economic Co-operation and Development study found that many of Europe\u2019s historical wealth taxes \u201chadn\u2019t figured out how to solve the problem of what small businesses were worth,\u201d so were more narrowly focused on publicly traded stock and real estate. \u201cOver time, there was a lot of abuse where people shifted their assets to make them look privately held.\u201d<\/p>\n

The California proposal \u201ctries to solve that problem\u201d by including small businesses and other privately held wealth in their calculations of net worth, he said \u2014 and benefits from the fact that such wealth has gotten a lot easier to track and appraise in recent years.<\/p>\n

Doing so would be a familiar exercise for many California billionaires already, he said, as it is hard to raise venture capital, for example, without audited financial statements. <\/p>\n

Backers of the measure said it is harder for U.S. citizens to avoid taxes by moving abroad than it has been for Europeans, and that evidence from Switzerland and Spain suggests differing tax rates between a nation\u2019s individual states do not cause massive interstate flight.<\/p>\n

\"San <\/p>\n

San Jos\u00e9 Mayor Matt Mahan, who might run for governor, opposes the proposed tax on California billionaires.<\/p>\n

(Rich Pedroncelli \/ Associated Press)<\/p>\n

For example, each state in Spain sets its own wealth tax rate, and Madrid\u2019s is 0% \u2014 but that has not caused an exodus from other parts of Spain to Madrid, Galle said.<\/p>\n

The risk of California billionaires avoiding the tax by simply moving to another U.S. state was further mitigated by the measure\u2019s Jan. 1 deadline for avoiding the tax. Galle said the deadline \u201cwas intended to make it more difficult for individuals to concoct the kind of misleading, apparent moves that wealthy people have used in other places to try to avoid a wealth tax.\u201d<\/p>\n

Gamage said that \u201chistory shows if a tax on the wealthy can be avoided by moving paper around, claiming that you live in another location without actually moving your life there, moving assets to accounts or trusts nominally in foreign countries or other jurisdictions, you see large mobility responses.\u201d<\/p>\n

But when \u201cthose paper moves are shut down,\u201d there\u2019s much less moving \u2014 and \u201cthat\u2019s the basis for the California model,\u201d he added.<\/p>\n

The outlook<\/p>\n

Ghassomian, who said he has been \u201cfielding a lot of inbound inquiries from clients who are just kind of worried,\u201d said it is clear that the proposal\u2019s authors \u201chave done their homework\u201d and tried to design the tax in a smart way.<\/p>\n

Still, he said, he has concerns about the cost of administering the tax outpacing revenues, especially amid litigation. Residency battles alone with billionaires whose claims of departing the state are questioned could take \u201cyears and years and years\u201d to resolve, he said.<\/p>\n

\u201cThe revenue has to line up with expenditures, and if you can\u2019t count on the revenue because it\u2019s going to be tied up in courts, or it\u2019s going to be delayed, then I think that creates some real logistical hurdles,\u201d he said.<\/p>\n

Smetters said predicting revenues from a tax on so many different types of assets is \u201creally hard,\u201d but one thing that has generally held true through history is that \u201cmost countries, even with less-mobile wealth, typically do not get the type of revenue that they were hoping for.\u201d<\/p>\n

David Sacks, a venture capitalist and President Trump\u2019s AI czar who decamped from California to Texas, said on the sidelines of the World Economic Forum in Davos, Switzerland, last week that the measure was an \u201casset seizure\u201d<\/a> more than a tax, and that the state would be headed in a \u201cscary direction\u201d if voters approved it.<\/p>\n

Darien Shanske, a tax law professor at UC Davis and another drafter of the proposal, said he and his colleagues did their best to \u201clook at the lessons of the past, and apply them in a way that makes sense and is generally fair and administrable\u201d \u2014 in a state where wealth inequality is rapidly growing and a wealth tax presents unique opportunities.<\/p>\n

\u201cHaving a tax on billionaires does make particular sense in California because of the large number that live here and the large number who have made their fortune here,\u201d he said.<\/p>\n

Shanske said the proposed tax is designed to provide California a way to \u201ctriage\u201d soaring healthcare premiums resulting from legislation enacted by the Trump administration and congressional Republicans. The proposal asks for contributions from people who will quickly recoup what they are taxed given the exponential growth of their assets, he said. <\/p>\n

Emmanuel Saez, director of the Stone Center on Wealth and Income Inequality at UC Berkeley and another drafter of the measure, said many of the repealed European taxes targeted millionaires while providing loopholes for billionaires to avoid paying, whereas California\u2019s measure is \u201cexactly the reverse.\u201d<\/p>\n

He said the measure will raise substantial revenue in part because California billionaire wealth more than doubled from 2023 to 2025 alone, and is \u201cthe innovative and first-of-its-kind tax on the ultra-wealthy that the moment requires.\u201d<\/p>\n

Thomas Piketty, a French economist and author of \u201cCapital in the Twenty-First Century,\u201d called California\u2019s proposed tax \u201cvery innovative\u201d and \u201crelatively modest\u201d compared with massive wealth taxes after World War II \u2014 including in Germany and Japan \u2014 and said it would not only improve healthcare in the state but \u201chave an enormous impact on the U.S. and international political scene.\u201d<\/p>\n

\u201cIn the current context, with a deeply entrenched billionaire class, wealth taxes meet even more political resistance than in the postwar context, and this is where California could make a huge difference,\u201d he said. \u201cThe fact of targeting the revenue to health spending is also very innovative and can help convince the voters to support the initiative.\u201d<\/p>\n

Times staff writer Seema Mehta contributed to this report.<\/p>\n","protected":false},"excerpt":{"rendered":"In the roiling debate over California\u2019s proposed billionaire tax, supporters and critics agree that such policies haven\u2019t always…\n","protected":false},"author":2,"featured_media":149870,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[74244,13573,74243,7,9,8,7833,418,1741,16612,74242,13995,62371,4975,74241,225,36690],"class_list":["post-149869","post","type-post","status-publish","format-standard","has-post-thumbnail","category-california","tag-backer","tag-billionaire","tag-brian-galle","tag-california","tag-california-headlines","tag-california-news","tag-critic","tag-history","tag-lot","tag-measure","tag-modest-revenue","tag-net-worth","tag-one-time-tax","tag-proposal","tag-similar-wealth-taxis","tag-state","tag-switzerland"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/149869","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=149869"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/149869\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/149870"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=149869"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=149869"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=149869"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}