Christmas is over, but Newsom Nation is still looking under the tree and digging through stockings for presents. The Golden State is considering a wealth tax. This new scheme is aimed at curbing fiscal pressures that are turning California dreams into California nightmares. For conservative outsiders, this is a case of schadenfreude for progressive Silicon Valley types who have yearned for a leftist utopia, filled with censorship, big government, and illegal immigrants.
Wealth Tax in California
California is facing a staggering $500 billion in state government debt, the highest in the nation. Last year’s budget deficit topped $70 billion. At the same time, public services are deteriorating, homelessness is out of control, and the cost of living is forcing businesses and households to flee.
To plug the gaping holes and keep struggling government programs afloat, Silicon Valley’s billionaires could be forced to pay the tab. A new one-time 5% wealth tax on the assets of Californians worth more than $1 billion as of Jan. 1, 2026, is being floated ahead of November’s statewide ballot. If approved by voters, the bill would be due in 2027, with the option of making payments over five years.
The levy would target stocks, real estate, pensions, retirement accounts, and private company shares. The money would then be allocated to a special fund, with the revenues used mainly on health care, education, food assistance, and administration.
Reactions have been mixed. It has the backing of the Service Employees International Union–United Healthcare Workers West. Rep. Ro Khanna (D-CA) has flip-flopped on the issue but recommended carve-outs to prevent inevitable consequences. Gov. Gavin Newsom (D) says he opposes the idea but urged wealthy residents to calm down if such a wealth tax is introduced.
“It’s not something to be panicked about, but it’s part of the broader concern and narrative that’s developed in this country of the haves and have-nots, not just income inequality, but wealth inequality,” Newsom told an audience at The New York Times DealBook conference earlier this month.
Pros, Cons, and Schadenfreude
The first drawback is that it would not address the meat and potatoes of California’s fiscal woes. It is essentially a bailout for progressives by progressives.
In addition to the aforementioned dollars and cents, the California State Auditor published a 92-page report that discovered more than $70 billion in taxpayer funds had been lost. This included $24 billion to fight homelessness, $18 billion for a high-speed rail, and $2.4 billion in SNAP fraud. The next time the state needs money, it will tap the same well to cover the cost of its incompetence.
Billionaire investor Bill Ackman warned that California is presently “on a path to self-destruction.” Palmer Luckey, cofounder of the defense tech startup Anduril, recently took to X to warn that this proposed wealth tax could prompt founders and capital to leave California. “I made my money from my first company, paid hundreds of millions of dollars in taxes on it, used the remainder to start a second company that employs six thousand people and now me and my cofounders have to somehow come up with billions of dollars in cash,” Luckey wrote on X.
However, the coquettish mistress known as karma would appear from behind the famous Hollywood sign and waltz through Silicon Valley. For years, these tech bros have wreaked havoc on both the state and the country, either by advancing leftist causes or censoring right-wing voices. These are the policies wealthy leftists have endorsed, but they will learn there is a reason “don’t California my [insert state here]” has become popular phrase in many places across the country.
Wealth Taxes Don’t Work
Call it a wealth tax. Call it a millionaire’s tax. Call it a surcharge. No matter how it is described, the evidence shows it rarely works. In 2007, Maryland introduced a millionaire’s tax. What happened? One in eight millionaires left a year later. Norway raised the rate in 2021. The result? One-quarter of the top taxpayers left in a couple of years. Many Organisation for Economic Co-operation and Development (OECD) countries adopted this policy, only to later repeal it.
That said, according to the Tax Foundation, the only exception to this rule has been Switzerland. “Historically, Switzerland has collected considerably higher revenues from its wealth taxes than other countries,” economists wrote in a paper. However, there are caveats, such as lower wealth tax rates, lower exemption thresholds, and a higher share of wealthy manner und frauen.
The 0.01%, the 0.1%, and the 1% have the means to absquatulate from a jurisdiction that penalizes wealth. Unfortunately, when these individuals or companies flee, the poor and middle class are left behind, without the resources to leave.
