this California wealth tax thing is just incredible.
so in October 2025, a California healthcare union proposed a "one time" 5% tax on any billionaire's wealth. the ballot measure will be voted on next month. In early December 2025, California announced that it would be a retroactive tax if passed, applying to anyone with CA residency as of Jan 1, 2026. The objective is to pay for Medi-Cal, California's incredibly dysfunctional healthcare system. (which also functions as a glorified welfare apparatus, but that's a discussion for another time).
polls reveal that the CA electorate is split around 50/50 on the tax, but prediction markets only give Prop 40 a ~23% chance of passing (there are competing measures on the ballet that would nullify it).
there are 200 billionaires in CA, worth collectively somewhere between $2.3 and $2.6 trillion. 5% of that is around $100b, accounting for a small amount of attrition. proponents of the tax forecasted a significant windfall, assuming only a 10% departure rate.
supporters thought they were being clever with the retroactive concept. no billionares would leave CA in the few short months between the tax being proposed and the residency cutoff date, without the tax even having passed yet, right?
well as it turns out, they did.
a new paper [1] from two academics at Stanford called "The Net Present Value of the California Billionaire Tax Act", argues that not only did more billionaires leave due to the proposed tax than its proponents expected, but that the value of the tax, if it does pass, is actually negative.
proponents of the tax only assumed 10% avoidance, that is, only 10% of the taxable base of targeted billionaires would leave CA within the very short Oct-Dec 2025 window. Jaros and Rauh, the Stanford academics, find that a lower bound of 28.6% of the taxable base managed to leave.
just based on known departures, those departures total $577b in net worth, or $28.8b in potential tax lost. this of course does not capture everyone (many left without announcing their departure), so the authors normalize to departure rates estimated from other wealth tax events, and apply other discounts for litigation, arriving arrive at a figure of only $28-$36b in forecasted tax revenues.
but this isn't all! all of the income taxes paid by the departed billionaires are also forsaken. the authors estimate that CA billionaires pay $3.3- 5.8b in annual income taxes. they assume a midpoint of $2b lost in annual collections from departed billionaires. the net present value of that lost income stream is -$68.9 billion.
so when you add it all up you get:
+ $30b one-time tax windfall (estimated)
- $69b in present value of lost future income taxes
= - 38.9b overall net present value of the tax
of course, this analysis is highly estimate driven. the authors simulate the parameters 100k times and find a negative NPV of the implemented tax 85 percent of the time.
and if the tax doesn't pass, which it's not looking like it will, California still ended up losing at least $577b in departed net worth, and they have permanently poisoned the well with entrepreneurs who will now worry about future wealth taxes.
[1]: nber.org/system/files/w
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the black pill is... the purpose of the tax was never to raise revenue, it was to punish certain people and reshape the demographics of CA
Idiots will read this and think the solution is to do a two time 10% wealth tax
Holiday shopping starts before Black Friday. Go live on X now and reach buyers before Peak.
Can't this also affect future business owners becase if people start worrying about being taxed more down the line, they might think twice before settling there.
Yup.
The knock on effects from expropriation are huge and unquantifiable. CA is basically saying they’re untrustworthy and don’t respect property rights. Diff between that and Venezuela or Zimbabwe is just a matter of degree.
Turns out if you yell tax in the Golden State; folks actually hear you
I’m not against higher capital gains taxes on a federal level; inherently one mechanism to address inequality resulting from equity growth.
Yet on a state by state level; on top of already progressive
specifically to pay for medi-cal which is the biggest fraud morass imaginable. it is basically entirely to pay for IHSS which is a program where people get paid by the government to hang out with their relatives. its a covert welfare / handout scheme.
i'll do a longer thread on
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nic carter
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There’s a ton of fraud all over obviously but it’s specifically those two states that have scaled up carefare to a comical extent - IHSS in CA and CDPAP in NY
IHSS pays people to hang out with their relatives. 875k recipients this year costing the state $34b a majority of which
Hilariously incompetent. Also remind me, what % of this is done? Unreal to want to give these people more $ to light on fire. If they finished projects it would be one thing, but all the spending doesn't actually do anything, negative value even
the scum in Sac never really targeted the billionaires- they want to tax the millionaires which have much more wealth and less ability to leave the state.
Smart founders and business owners know that starting businesses in California carries a huge financial risk. The damage has been done.
Easy solution if they want to get this passed:
Any appraisal of property by the government needs to be a binding offer by the government for that property
If the Prop 40 Billionaire wealth tax passes and California Tax revenue drops after adjusting for lost income taxes from billionaires who left
The Democrat Super majority can vote to expand the wealth tax to be annual and drop in threshold for taxing a person’s wealth
So those
That’s why if this ever came on the ballot I’m voting for it. It punished all three parties: the libtard billionaires that funds the left, the government who will now have less money, and the retarded voters who continue to vote for their own demise.
Exactly. How many of us non-billionaires left just because we saw the writing on the wall - was talking about $50M as a threshold for the tax.
Add that to the insane Covid shit. Woke shit. Vaccine shit. Etc etc.
Was part of the breaking point for me. I’m not waiting
The left has zero knowledge of human behavior and basic economics of incentives . So their wealth tax will actually cost CA income ! While at same time likely lead to more departures and less billionaires willing to make CA a home for their personal lives or their business HQ
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People sit up all night fantasizing about spending other people’s money. They literally sell people on envy.
California politics are certainly where you find our brightest minds
Worth noting that "one time" wealth taxes rarely stay one time. Europe's wealth taxes in the 1990s were sold identically before becoming annual fixtures once revenue was baked into budget projections. California's legislature will need that 5% again the moment spending
Lets kill the golden goose so we can get the gold now. Never mind the future.
…how is it legal to pass a retroactive tax on people who don’t live in the state anymore?
