California's wealth tax will lose money

 Fourteen years ago, the invaluable Bill Whittle published a classic You Tube video titled Eat The Rich! He began with the insufferable Michael Moore who asserted that we have no budget problems. The only problem is the “uber rich” are hoarding all the money that really belongs to everyone else. Whittle then methodically explained how, if we took every penny of American’s wealthy, we could pay for all of 2011’s congressional spending. Whittle didn’t address the national debt, only whether taking all the money of the rich could cover one year of multi-trillion-dollar congressional profligacy.

Whittle took every penny of ExxonMobil’s and WalMart’s profits and the rest of the Fortune 500 companies. He took every penny of professional athlete’s salaries and every penny from everyone making more than $250,000. He took all the profits from movies and their merchandising and killed all the billionaires and took 50% in death taxes.  Even that wasn’t enough, so he took every penny from the billionaires and millionaires and cut off all foreign aid. He even hit every American for multiple thousands.

All of that paid for one year of congressional spending, but at the cost of wiping out all private capital, all our productivity, all our wealth, all our manufacturing capacity. He ended the video by asking: “now what?”

The fiscal geniuses in charge of California might well ask that question. They’re planning to enact a supposedly one-time billionaire tax, taking some 5% of the total wealth of every California billionaire. Billionaires tend not to be stupid, and they recognize if CA pulled off a “one time” tax, it would become addicted to that revenue and would make it permanent. They’d spend more and more and continually increase the tax to the point that like Whittle, they’d eventually take it all. As a result, not a few billionaires have voted with their feet and moved, mainly to Texas and Florida. Others are in the process of moving.

Margaret Thatcher was right: the trouble with socialism is you eventually run out of other people’s money.

But would this scheme actually work? Because Americans are free to move to tax-free states, wouldn’t this chase billionaires out of California to the point the state actually lost money due to a depleted tax base? After all, plenty of mere millionaires and middle-class Californians are assuming the happy status of former Californians. At Powerline, Scott Johnson explains: 

In a debate with University of California–Berkeley economist Emmanuel Saez, a key architect of the proposed wealth tax, Rauh pointed to his own research showing the net present value of the tax is likely negative, meaning it will drive jobs and investment away from California for years if it is passed.

 Proponents of the wealth tax “would liquidate Silicon Valley for an extra $2 billion per year,” Rauh said. “This is classic, not showing or considering what the economic damage would be of liquidating Silicon Valley.”

Rauh’s study shows the proposal would leave the state worse off by an estimated $25 billion once future lost income tax revenue is considered. See Benjamin Jaros, Joshua D. Rauh, Gregory Kearney, John Doran, Matheus Cosso, “The Net Present Value of the Billionaire Tax Act: An Assessment of the Fiscal Effects of California’s Proposed Wealth Tax.”

 

It’s so simple even California Democrats should be able to understand it. They think the billionaire’s taxable wealth is around $2 trillion, but because so many have already fled, it’s really only about $1.2 trillion. Because of that flight, California could only collect about $40 billion instead of the $100 billion over which they’re salivating. It’s almost certainly worse, because additional billionaires are going to flee between now and when the law is enacted.

As Rauh noted, when lost tax revenue due to continued out migration is factored in, California stands to be $25 billion in the hole due to the wealth tax alone. I wonder how that’s going to affect the High- Speed Rail to Nowhere?  

And how is California’s budget doing? Not so well:  

“The state’s negative fiscal situation is now chronic.”

Those are the words of legislative analyst Gabe Petek, who recently published a comprehensive analysis of California Governor Gavin Newsom’s 2026-2027 budget. In the report, Petek sounded the alarm on the Golden State’s financial health, which is characterized by “four years of projected deficits and a cumulative total of $125 billion in budget problems.”

It now appears that Democrat leadership amounts to chasing productive citizens out of state, gross overspending, rampant graft and corruption, but plenty of state funds for the Governor’s hair gel and a nonexistent railroad. I’m sure Gavin Newsom can do for America what he’s done to California. But to paraphrase Bill Whittle: what then?

Mike McDaniel is a USAF veteran, classically trained musician, Japanese and European fencer, life-long athlete, firearm instructor, retired police officer and high school and college English teacher. He is a published author and blogger. His home blog is Stately McDaniel Manor. 

https://www.americanthinker.com/blog/2026/03/california_s_wealth_tax_will_lose_money.html