(The Center Square) – A new report states that the proposed billionaires’ tax could be losing the state money before it even makes it to the ballot.
The report was issued by the National Taxpayers Union Foundation and stipulates that the tax, which would impose a one-time 5% tax on Californians who have $1 billion or more in assets, could be incentivizing the Golden State’s billionaire class to move to other states.
The tax is meant to generate $100 billion in revenue to help offset federal budget cuts to public services like Medi-Cal, known federally as Medicaid, according to previous reporting by The Center Square. The tax would apply to stocks, bonds, art, collectibles and investments.
The findings in the report show that the proposed tax has given some California billionaires reason to move out of state, resulting in a $1 trillion loss to the state in lost income tax revenues, according to the report’s author.
“This is one of the most apparent responses we’ve seen to a tax proposal, and that’s just because of the sheer radicalism of it,” Andrew Wilford, director of the interstate commerce initiative at the National Taxpayers Union Foundation and author of the report, told The Center Square on Monday. “It’s just bad policy and it’s going to end up having a negative impact on California, regardless of whether or not it gets passed, which is really a reflection of just how misguided this is.”
The report comes on the heels of Mark Zuckerberg, the billionaire founder of Facebook, appearing to make moves to leave California. Zuckerberg bought a mansion in Florida, but has not confirmed to The Center Square that he is planning to relocate permanently.
Other notable billionaires who have decided to pull up roots and go to other parts of the country include Google co-founders Larry Page and Sergey Brin, Palantir Technologies and Paypal co-founder Peter Thiel and venture capitalist David Sacks, according to the National Taxpayers Union Foundation report.
The report also points to previous research by the foundation, which claimed that California has already lost a significant number of wealthy individuals. Florida, Texas and North Carolina have attracted the most number of wealthy individuals, followed by Utah and Wyoming.
“It doesn’t take very many people to have moved to appreciably lower that number,” Wayne Winegarden, a senior fellow in business and economics at Pacific Research Institute in Pasadena, told The Center Square on Friday. “So what you’re doing is, you’re gutting your income tax revenue stream for the future. So you’re going to undermine our income tax revenues for the hope of this one-time windfall.”
That creates a budget problem, Winegarden said, and it undermines state funding for other government functions.
“All of this is going to go to hospitals, Medicaid, Medi-Cal, all of those things,” Winegarden said. “But what about Cal State Universities, the UCs, K-12, transportation, homelessness, police? It goes on and on.”
A representative for the union backing the billionaires’ tax, Service Employees International Union – United Healthcare Workers West, wrote in a response to The Center Square that billionaires in California contribute a minute fraction of the state’s total income tax receipts.
“Billionaires don’t earn much ordinary taxable income, nor do they generally sell their assets, so their income represents just 2.5% of total income tax receipts in California,” wrote Meghan Finegan, senior executive vice president of 617 Media Group.
While no Democratic lawmakers responded to The Center Square on Monday, Republican legislators sent responses to The Center Square criticizing the billionaires tax, calling it a deterrent to investment and jobs in the state.
“Analysis shows it could actually reduce state revenue before it even takes effect, as individuals and businesses reconsider whether they can afford to stay in California,” Assemblymember Tri Ta, R-Westminster, wrote to The Center Square. “We have seen similar proposals tried elsewhere, and they have consistently failed to deliver the promised benefits while driving investment and jobs away. Policies like this risk weakening our economy and shrinking the tax base that funds essential services.”
