Voters in California will soon decide whether to impose a special tax on billionaires. Should Prop 40 pass, any California resident with over $1 billion in wealth will be hit with a one-time 5% tax on all their assets.
The blatant money-grabbing action aims to shore up California’s growing government deficit; a deficit that has only happened thanks in large measure to massive government overspending under Governor Gavin Newsom and the state’s Democrat-dominated legislature.
Interestingly, several prominent Democrat leaders within the state joined Newsom in voicing their opposition to Prop. 40. As they observe, this wealth tax will only send more of the state’s wealthiest fleeing.
Indeed, San Francisco Democrat Party committee member Eric Kingsbury argues that this tax would be an “unworkable policy” that “has the potential to harm our economy.” Kingsbury adds, “It very likely will lead to people choosing to not create businesses that they think are going to be very successful in California, just so they are not subject to a future tax.” Exactly.
So, Prop 40 is effectively splitting California Democrats. However, California Democrats like Newsom and Kingsbury don't oppose the wealth tax because they oppose levying higher taxes on the wealthy. Rather, it's because they know that, thanks to America’s federal system, California’s wealth has the option to move out, taking their wealth and job-creating businesses with them to lower-tax states.
The Golden State has been experiencing this phenomenon for half a decade now, as California’s Democrat leadership has made the state less business-friendly and more costly for residents.
Instead of simply opposing the wealth tax, Newsom is calling for a national wealth tax. “It’s time for an economic reset for America,” Newsom wrote in a Substack post back in June. “Wealth is movable, and it shops for the state with the lowest taxes. The fight belongs at the federal level, where this broken system was created in the first place,” he argued.
Newsom, like other Democrats objecting to Prop 40, fails to recognize that such a wealth tax is not only economically untenable but is also unjust. Instead, he worries that if not forced at the federal level upon all billionaires, or anyone with over $100 million in assets, then it won’t work politically.
In other words, Newsom fully supports the massive wealth tax, just not if people can avoid it simply by moving to another state.
The trouble is, as with all socialist ideals, unfairly taxing the rich only robs the state or national economy of its biggest jobs and revenue generators. How many times do people need to see that socialist governments are terrible frameworks for wealth generation? Indeed, they end up producing the exact opposite effect. The most recent example is Venezuela, which went from one of the wealthiest nations in South America to one of the poorest, thanks to socialism.
Yet those with a lust for power will sell anything, even patently bad and socially and economically damaging policies, if doing so will get them into positions of power. Newsom’s proving this reality with his hypocritical opposition to Prop 40 for California, but his advocacy of a similar national wealth tax.
It will be interesting to see whether California voters approve Prop 40. If they do, it will only push more people to flee the state, further demonstrating how poorly wealth tax policies generate economic opportunities for everyone.
