California’s Proposition 40 would soak the rich and sink the state

Progressives are hoping California’s proposed wealth tax — a ballot initiative known as Proposition 40 — will be a launching pad for a nationwide push to tax the “super rich.” But fresh evidence suggests the policy is likely to backfire.A new paper published by the National Bureau of Economic Research finds that the proposed levy, a one-time 5% tax on billionaires’ wealth, would likely leave California with less revenue.“Across 100,000 simulated revenue and discount rate combinations,” economists Benjamin Jaros and Joshua Rauh write, “85 percent of plausible outcomes produce a negative net present value of state revenues.” In other words, the chances of the tax generating positive net revenue are about the same as rolling a six on a die. It’s not that the tax wouldn’t generate revenue; it would — an estimated $30 billion. That’s a lot, though far less than many rosier projections suggest. The problem is how much revenue is likely to leave the Golden State if the tax passes.“We estimate that California’s billionaires contribute $3.3–5.8 billion annually in state income taxes,” the authors write. “The present value of permanently lost income tax collections from departures more than offsets the one-time wealth tax revenue, yielding a net present value of negative $38.9 billion.”By this estimate, California’s wealth tax would result in nearly $9 billion in lost revenue.Skeptics might suspect that Rauh and Jaros overstate the tax’s economic fallout, but evidence suggests the risk of capital flight is quite real — and already underway.Following the Prop 40 announcement, filmmaker Steven Spielberg established residency in New York, while Google co-founders Larry Page and Sergey Brin relocated out of California. Palantir co-founder Peter Thiel moved to Miami, and venture capitalist David Sacks announced a move to Texas. The list goes on.Few of these people came out and said they were leaving to dodge taxes. But it’s a common response to wealth taxes. When Norway implemented a much smaller wealth tax — raising it to 1.1% — in 2021, more than 30 billionaires and multimillionaires left the country the following year, more than the 13 preceding years combined.Similar evidence can be found in other countries and states that have attempted aggressive tax-the-rich schemes. This includes Massachusetts, which in 2022 imposed a 4% surtax on income above $1 million, which was accompanied by a massive outflow of taxpayers.None of this should come as a surprise. People generally dislike taxes and will take reasonable steps to avoid them when they can, especially Americans. After all, one of the primary catalysts of the American Revolution was the British Empire’s aggressive taxation on everything from tea and sugar to paper, glass, and molasses.While progressive billionaires won’t talk about taxation like members of the local Tea Party, many will respond to aggressive taxation like everyone else: they’ll seek to avoid it. This is why shrewd minds have long observed that extracting revenue from the public requires a delicate touch.“The art of taxation,” Jean-Baptiste Colbert, the finance minister to King Louis XIV, purportedly said, “consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing.”Colbert likely would have laughed at California’s clumsy attempt to pluck its billionaires. Unfortunately, the threat alone has already done serious harm by driving out wealth creators who are reluctant to have their feathers plucked. Worse, there’s a possibility the proposal could pass.At the beginning of 2026, prediction markets put the odds of passage at 61%. As of this writing, odds on Polymarket had fallen to 22%, but some observers think the measure’s chances are higher.“This is underpriced. Never underestimate the stupidity of the average voter,” one Polymarket commenter wrote.The commentator may be wrong, but the comment reveals a problem with modern governance: Property rights should not be subject to the whims of voters. Thinkers from John Locke to Frederic Bastiat observed that the very purpose of government was to protect property. Using the state as a tool to loot one another defeats its raison d’être.Both history and an abundance of economic literature show that prosperity is strongly correlated with strong property rights, which means that using the state to loot isn’t just wrong; it’s destructive.META CUTS TAX DEAL WITH ZUCKERBERG TO KEEP HIM IN CALIFORNIA EVEN IF WEALTH TAX PASSESIf enough Californians decide it’s wise to stick it to billionaires, the Golden State is likely to find itself a step further on the road to serfdom.And as this kind of economic populism continues to gain steam on both the Right and the Left, all Americans would do well to remember the words of John Adams: “The moment the idea is admitted into society, that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence.”