Governor Gavin Newsom appears to be aware of the pitfalls associated with implementing a wealth tax in California, yet he is now advocating for its adoption across the entire nation.
Gavin, unfortunately, your initial assessment was correct: a wealth tax is a poor choice both for California and for the nation as a whole.
Newsom has consistently opposed a California ballot initiative that seeks to impose a one-time 5% tax on individuals with a net worth surpassing $1 billion.
Even with the Service Employees International Union-United Healthcare Workers West offering to lower the proposed tax rate from 5% to 2%, Newsom remains unconvinced of its feasibility.
It is evident that he recognizes such a tax would likely prompt billionaires to leave the state, ultimately destabilizing California’s economy.
Indeed, the mere proposal, which got over 900,000 signatures, already has the uber-rich heading for the exits.
Google co-founder Sergey Brin moved 15 of his LLCs out of state. DoorDash co-founder Andy Fang called the levy “stupid” and said it would be irresponsible for him to stay if it passed.
Ex-Uber boss Travis Kalanick skedaddled to Austin, Texas, in December to avoid the tax.
Yet now that he’s eyeing a run for president in 2028, Newsom wants folks to believe a national wealth tax won’t push folks abroad. Big mistake.
Palantir Chairman Peter Thiel recently bought real estate in Argentina, seeking refuge in part just from Cali’s billionaire tax — even after he spent $3 million to oppose it.
Other billionaires are similarly eyeing Latin America for its lower taxes.
Felipe Silva, a Uruguay–based adviser with real-estate firm Engel & Völkers, says Uruguay is attracting the wealthy, particularly from California and New York, thanks to its its business climate and safety.
Note, too, that wealth taxes haven’t done well for nations that tried them.
Of the 12 Organization for Economic Co-operation and Development countries that imposed them in the 1990s, eight ultimately rescinded them — as government revenues fell short, their economies suffered and administrative tasks proved daunting.
In 1997, Germany declared its wealth tax unconstitutional. In 2021, the Netherlands ruled it violated European property-rights law.
Such a tax may well be unconstitutional in America, too.
As for claims about fairness: The top-earning 1% of Americans are already overtaxed, accounting for 40% of federal income taxes, while earning just 22% of income.
By comparison, the bottom half account for just 3%.
Newsom’s sudden shift may play well with Democrats’ tax-the-rich crowd, but it won’t help with anyone who understands economics — and actual fairness.