Will the Wealth Tax Fail?

California’s experiment: Will California’s proposed wealth tax, Prop 40, pass next week? And if it gets passed, will it end up actually costing the state money instead of generating revenue?

The basics: The proposal features a one-time 5 percent tax on people with net worths over $1 billion who lived in the state on January 1, 2026 (with the net worth amount calculated as of December 31, 2026). The idea for the snapshot date is presumably to prevent capital flight once the tax passes. The tax’s supporters say the tax’s revenues will amount to $100 billion and will fund California’s health care system, which need to make up for federal Medicaid cuts.

Seven billionaires, representing 30 percent of the total billionaire wealth in the state, left California before January 1, 2026, when news of the possible tax broke. Peter Thiel, Larry Page, and Sergey Brin are among the deserters. The French economist Gabriel Zucman—an intense defender of the wealth tax—seems committed to the idea that this flight won’t matter too much. He argues that while removing those seven brings down revenue estimates to $89 billion, adding in less-prominent small-time billionaires raises revenue to $115 billion.

This is silly. As The Washington Post‘s Megan McArdle points out, there’s no reason to believe those less-famous billionaires would stay put. We have a hard time estimating what the total preemptive flight looks like, and how many billionaires have successfully taken up residency elsewhere.

“Either the tax is annual—and in that case it generates revenue annually, and some billionaires leave,” claims Zucman. “Or the tax is one-time—in that case it generates revenue in just one year, and there is no incentive to leave. It can’t be both at the same time.” Zucman doesn’t seem to consider that billionaires have already left, as soon as the idea was seriously floated, thus taking early steps to shield their wealth from the state.

Will it pass? “Likely voters are essentially where they were a month ago,” reports Politico, based on recent polling data, “with 46% in favor of Proposition 40 and 43% opposed—despite a recent push by backers of the measure, including Sen. Bernie Sanders, to rally support.” Interestingly, “a strikingly high share of registered voters (84%) said they’d been exposed to advertisements or messages about the tax, but a 45% plurality said the communications had not swayed them, and those whose views had shifted were just as likely to be more opposed as more supportive.”

There’s another complication: On that very same ballot, voters will decide on Propositions 41 and 42, competing measures that could keep Prop 40 from taking effect. Prop 40 will be nullified if either one gets more votes; but Prop 40 will nullify both of them if it gets more votes. Prop 42 would bar new taxes on personal property such as businesses, investments, retirement accounts, trusts, and art collections—things Prop 40 targets. It also bans retroactive taxes, thus making Prop 40 impossible to pull off.

Back in January, Pirate Wires’ Mike Solana spoke with a bunch of billionaires who were worried about the tax and making plans to flee, partially out of distrust that the tax would be one-and-done. “Three men I spoke with in the largest billionaire Signal chat said they ran an informal poll, and seventy percent of the chat (around sixty people, not all of whom were billionaires) indicated they would leave the state if the ballot proposition passes,” reports Solana. “According to that same poll, around 15% have already left the state.”

“There is now real danger in appearing successful in the state of California,” writes Solana, “as the far left, imbued with a great deal of power, and benefiting now from several years of wealth scapegoating throughout the mainstream press, attempts to liquidate its perceived enemies in business.”

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Scenes from New York: I’m fully aboard this train these days, though open to being convinced why I’m wrong:

If you truly *love* American cities, you MUST support strict enforcement of laws against anti-social behavior. Paying bus fares, red light cameras, camping on sidewalks, smoking on trains, off-leash dogs, etc etc

If people want to do whatever they want, that’s FINE in the… https://t.co/XU0WQR30yz

— Bobby Fijan (@bobbyfijan) October 26, 2026

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QUICK HITS

• “Brazilian markets are heading for a major rout when local trading begins after President Luiz Inácio Lula da Silva pulled off a stunning comeback to defeat Flávio Bolsonaro, the right-wing candidate that many investors preferred,” reports Bloomberg. This will be da Silva’s fourth term.
• Is dynamic pricing on the rise? Customers say yes, but most companies say they’re wrong. My thought: Even if it’s not currently happening to the degree angry customers claim, it certainly will be big in the future, as online shopping takes over and AI makes implementation easier. Consider the upside, though, noted in this Wall Street Journal piece: “Much current angst is focused on electronic shelf labels, which have replaced the printed labels that dotted shelves at groceries and other stores. Research on digital shelf labels in the U.S. and Europe, where grocers have widely used the technology for more than a decade, found the labels don’t lead to surge pricing, in part because price changes are obvious to anyone walking by. Rather, research found, grocers have used the labels to discount goods that are about to expire, reducing food waste.”
• Great Washington Post headline: “Europe is running out of other people’s money.”
• President Donald Trump claims the ships passing past Cuba on their way home from Iran will just, uh, handle the situation there. Sure.
• Interesting:

Striking detail in the big NYT piece on Taiwanese families adjusting to working at the huge new TSMC chip plant in Arizona: their surprise at the lack of rigor in US schools. pic.twitter.com/YkSPzbHCuE

— Alec MacGillis (@AlecMacGillis) October 26, 2026

The post Will the Wealth Tax Fail? appeared first on Reason Magazine.

Source: https://reason.com/2026/10/26/will-the-wealth-tax-fail/