J.D. Tuccille: Wealth-hating economists leverage credentials for billionaires tax - National Post
An attendee holds a sign before the start of a rally led by US Senator Bernie Sanders, Independent of Vermont, during the campaign kickoff for the California Billionaire Tax Act at The Wiltern in Los Angeles, February 18, 2026. Photo by PATRICK T. FALLON /AFP via Getty ImagesArticle contentIf California’s proposed wealth tax is defeated next week — polling now finds Prop. 40 underwater with voters — it will represent less a failure of economic arguments than of political activism given academic gloss. While the allegedly one-time five per cent tax on the assets of billionaires is based on the work of prominent economists Gabriel Zucman and Emmanuel Saez, the two University of California-Berkeley professors seem too willing to massage their research until it gives the results they seek. And what they ultimately want isn’t a one-time tax on the rich, but heavy ongoing taxation to eliminate success.
According to the California Secretary of State’s office, the much debated Prop. 40 “(i)mposes five per cent tax on certain taxpayers with assets over $1 billion” with the “revenue primarily for health care.” If passed, assets would be assessed at their value as of Dec. 31, 2026, for all individuals residing in the state on Jan. 1 of the same year — that is, 11 months before the tax’s potential passage. The tax would be payable in five annual installments “with each subsequent annual installment payment also being subject to an annual nondeductible deferral charge of 7.5 per cent of the remaining unpaid balance.”
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Advocates of the tax claim the measure “would raise about $100 billion over five years 2027-2031 (or $20 billion/year) from the 200 wealthiest Californian taxpayers.” Critics aren’t convinced. In a recent paper, economists Benjamin Jaros and Joshua Rauh point out that the tax’s threat is driving the wealthy to leave. “(P)ublicly confirmed departures already eliminated nearly 30 per cent of the wealth tax base before signatures were collected.” They believe the tax could collect $30 billion but that losses in income tax collection from those who left would make the wealth tax a net drain to the tune of — $38.9 billion.
Infuriated by the report, Zucman took to X to protest that “moving to another state doesn’t allow one to avoid the tax, since the tax would be owed by billionaires who lived in California at the beginning of 2026.” He added, “(t)here is no incentive to move to another state. One cannot avoid the tax by moving.”
But some high-wealth people have moved and continue to do so. Why? For starters, it’s not obvious that moving is pointless. Many experts, including Jared Walczak of the Tax Foundation, argue that “the retroactive residency date is fatally flawed under Supreme Court precedent barring retroactive imposition of a ‘wholly new tax.’” Legal challenges to the law enjoy a good chance of success.
Additionally, the measure removes the state constitution’s cap on taxes on intangible personal property and changes California’s tax environment. It may be a stalking horse for future taxes.
“Once that cap is lifted, future ballot initiatives and legislative action can build on the authority this amendment creates to impose additional wealth taxes at any rate, on any threshold,” warn Jaros and Rauh. “Thus, the Act establishes constitutional infrastructure for wealth taxation while presenting itself as a bounded, ‘one-time’ event.”
