For the fifth column in this series (earlier editions available here, here, here, and here), let’s start with this video of Professor Joseph Rauh explaining why the proposed wealth tax in California is economic lunacy.
This is a first-rate indictment of the proposed class-warfare initiative, and Rauh makes some excellent points. Here are five arguments that resonated with me.
Rauh, along with Benjamin Jaros, also criticized the wealth tax in a column for the New York Times.
Here are some excerpts.
…the 5 percent wealth tax on California’s ballot this year may sound like a harmless way to raise money, a proposal only billionaires would dislike. …A quick look at the math underpinning the proposal, which would tax the accumulated assets of ultrawealthy Californians, shows that the first net wealth tax in modern U.S. history would provide the state little and endanger its economic core. Other countries have made the same mistake Californians are being tempted to commit. In 1990, 12 industrialized countries levied a wealth tax. By 2025, nine countries had repealed theirs — including Denmark, Sweden, Germany, the Netherlands and France. These nations discovered that wealth taxes are hard to implement, cause wealthy people to move and take their money elsewhere and raise far less tax revenue than promised.
Rauh and Jaros have crunched the numbers.
What they found is that the tax likely will lead to less tax revenue.
We looked at 212 California billionaires the tax would target, and we estimate that the proposed wealth tax would raise just $40 billion for the state — not the $100 billion its backers claim. Several of California’s highest-profile billionaires, including the Google co-founders Sergey Brin and Larry Page, left California before Dec. 31, 2025. …Driving out some of the state’s most successful residents will have grave consequences. Every billionaire that left the state also took with them a stream of income tax revenue that would have grown over time and continued indefinitely. The billionaire flight is likely to be worse than what European nations saw, because moving out of state is easier than relocating to a new country. …This is why the state’s nonpartisan Legislative Analyst’s Office warned that the measure would cause a “likely ongoing decrease in state income tax revenues.” We calculated how much: Factoring in the loss of the income taxes that California’s departing billionaires would have paid, our best estimate suggests that the wealth tax would leave California worse off by about $25 billion.
Some readers may want to dismiss the Rauh/Jaros analysis as meaningless theory.
That strikes me as absurd since we’ve already seen lots of ultra-successful taxpayers leave the state (and we also have years of evidence of regular businesses and individuals moving to lower-tax jurisdictions).
But let’s look at a report from the Wall Street Journal that gives them some additional real-world evidence. Here are some key passages.
As wealthy Californians flee the state, deep-pocketed buyers are taking refuge in Nevada, which is starting to rival Florida as a tax haven for the elite. Amid surging demand for prime Tahoe property in Nevada, a recent string of megadeals reflects the premium buyers are willing to pay for a lower tax bill—and the widening price gap between the two sides of the lake. …In December 2025, just after the tax was proposed, Google co-founder Sergey Brin paid $42 million for a lakefront home in Crystal Bay, Nev., property records show. The same month, a 210-acre estate in Zephyr Cove, Nev., sold for $80 million to an undisclosed buyer. Then in March, an entity tied to venture capitalist Steve Jurvetson shattered the Nevada and Tahoe records with the $125 million purchase of an estate in Incline Village, Nev. …In the Tahoe area, Nevada homes typically carry a roughly 20% premium over similar California properties, Dietz said, and the delta is far wider for the priciest homes. “A $20 million property on the California side will be $40 million to $50 million on the Nevada side, that’s how dramatic the spread is,” he said. …the Nevada side of Lake Tahoe has notched at least 27 deals above $20 million since 2008, more than double the 11 on the California side… Like Florida, Nevada has no corporate tax, individual-income tax or capital-gains tax. By comparison, California’s top individual income-tax rate is 13.3%, and its top corporate tax rate is 8.84%, according to the think tank Tax Foundation. Both states have property taxes—0.5% effective property tax rate in Nevada compared with 0.7% in California.
Please note the quote about “A $20 million property on the California side will be $40 million to $50 million on the Nevada side.” Rich people are willing to pay twice as much in Nevada for a house in Nevada because the fiscal savings (no state income tax and no danger of a state wealth tax) are enormous.
I’ll close today’s column by illustrating why Rauh is right to warn that the proposed wealth tax won’t just be a one-time money grab.
As the tweet illustrates, the California proposal is the camel’s nose under the tent.
If the tax is enacted, the class-warfare crowd will instantly take steps to make it permanent. And they’ll take steps so that it hits a lot more people other than billionaires.
One of the big supporters of this class-warfare scheme is Congressman Ro Khanna.
If you don’t believe me, maybe you’ll believe him.
Here are some very relevant excerpts from something he just wrote.
There are more billionaires in my district and the surrounding area than almost any other Member of Congress. …California legislators have proposed a state tax to target similar excessive wealth. A proposition on the November ballot would levy a one-time 5 percent tax on the wealth of the state’s 250 billionaires. …I am backing it. …And the tax should not stop at billionaires, it must reach centimillionaires. The tax has to reach all fortunes $50 million and up, and one already does. Every year it has been introduced, I have cosponsored the Ultra-Millionaire Tax Act. It starts at $50 million: 2 percent a year on wealth above that line… Supporters are right to call the fight in California the reverse Proposition 13 of our generation….This is that revolt in reverse: instead of capping taxes on property, we are taxing the extreme wealth at the top.
He’s mixing two proposals (the state initiative and his legislation for a national wealth tax) in his analysis, but the message is clear.
He and his fellow travelers want permanent wealth taxes and billionaires won’t be the only targets.
P.S. Sadly, there’s no risk of me ever having enough assets to be directly affected by either state or national wealth taxes. But all of us will be indirectly harmed, as explained here, here, here, here, and here.
