A Wealth Tax That Will Work!

Two likely contenders for the 2028 Democratic presidential nomination have taken opposite sides on California’s proposed wealth tax. One of them is dead wrong.

Friends,

A proposed wealth tax has split California Democrats — and highlighted the difference between two likely contenders for the Democratic presidential nomination in 2028.

Governor Gavin Newsom opposes the wealth tax. Ro Khanna, who represents Silicon Valley in the U.S. House, favors it.

The wealth tax is a good idea and should be replicated across the country.

In November, I joined with one of California’s most powerful unions (SEIU’s United Healthcare Workers West, whose members work in hospitals and clinics across the state) and one of the nation’s most respected economists (Berkeley’s Emmanuel Saez) to unveil and endorse it.

As I explained then, the proposed wealth tax is an emergency tax on billionaires, to make up for the $100 million hit to California’s Medicaid program that Trump and his Republican Congress have made in their One Big Beautiful (big ugly) bill. That bill, you’ll recall, cut taxes mainly for the wealthy and paid for it by reducing federal appropriations for Medicaid.

If the wealth tax measure qualifies for the November 2026 ballot and is enacted by California voters, it would levy a 5 percent tax on the wealth of the state’s roughly 200 billionaires. It would direct 90 percent of those funds to California’s Medicaid recipients and the institutions that serve them (with the remaining 10 percent going to the state’s K-12 schools).

The measure could have much broader implications for America, at a time when the fortunes of the ultra wealthy have reached the stratosphere while median incomes are stagnant and public funding is shrinking.

California’s isn’t the only proposal to raise taxes on the ultra wealthy to finance what average working people need. Mayor Zohran Mamdani proposed one during his campaign, to help finance his ambitious free child care program in New York.

But all such proposals have raised predictable outrage from the rich, along with threats that they’ll move elsewhere where taxes are lower and dire predictions that their fellow plutocrats will refuse to move in. (Mamdani apparently has got funding from another source.)

Yet there’s scant evidence for these consequences. In fact, when Massachusetts passed a “millionaires tax” in 2023, conservatives claimed the rich would flee. But two years later, they hadn’t — and Massachusetts had collected $5.7 billion for infrastructure and public education.

Note also that the California proposal is a one-time-only tax and would be levied exclusively on billionaires’ net worth in 2025. So even if they decide to move to the Virgin Islands, they’ll still be liable for 5 percent of their wealth in 2025. (They can stretch out their payments over the next five years, but their payments will still be based just on their net worth in 2025.)

By the same token, the tax won’t crimp the fortunes of any billionaire who moves into California this year or any later year, as it applies only to the billionaires living in the state last year.

California’s nonpartisan Legislative Analyst’s Office has concluded that the billionaire tax would raise tens of billions of dollars in one-time revenue, while any long-term loss of tax revenue from billionaires moving out of California would be in the hundreds of millions of dollars a year — a tiny fraction of California’s more than $120 billion annual personal income tax base.

The incomes of America’s billionaires have been rising by an average of 7.5 percent a year since the start of the pandemic — in sharp contrast with the measly 1.5 percent average increase for median-income Americans. So even after the 5 percent tax is levied, the ultra wealthy will still be getting wealthier at a rapid clip.

The sums they’ll owe are readily calculable, since about 72 percent of billionaires’ wealth is in their ownership of publicly traded stock. As they do with their payment of income taxes, billionaires would file their wealth taxes themselves in 2027 (assuming the measure had been enacted the previous November) based on their net worth in 2025. The state can audit those returns if its estimates of their fortunes are significantly at variance with those filings.

The politics of this couldn’t be better, given that 15 million Californians on Medi-Cal (the state’s version of Medicaid) are losing much if not all of their health insurance because of cutbacks imposed by Trump and congressional Republicans — who, again, redirected those funds to massive tax cuts for the rich.

And remember, this tax affects just 200 billionaires.

Californians have until June to collect the required number of valid signatures — roughly 874,000 — to place it on the November 2026 ballot.

The wealth tax isn’t the final answer to America’s disgraceful inequalities of wealth and income, of course, but it’s a start — and any start is better than no start at all.

It may open the way to further reforms to rein in the obscenely rich — raising inheritance taxes, raising capital gains taxes, taxing rich people when they borrow against their assets (without ever selling them) to pay for their living expenses, and closing giant loopholes like the step-up basis (which allows people to pass on to their heirs their capital gains and never be taxed on them).

These efforts are essential not only to funding what most Americans need but also to preserving our democracy. Huge wealth at the top poisons our politics, as Elon Musk continues to demonstrate.

In fact, concentrated wealth is inseparable from concentrated power. It has contributed to an angry working class and the dangerous alliance between Trump’s MAGA followers and the billionaire class.

No one should believe that the current concentration of wealth at the top has come about because of the “natural” workings of the free market.

It’s occurred because, as the rich have become richer, their campaign contributions, public-relations hacks, and “think tanks” have resulted in changes in laws governing taxes, monopolies, labor unions, fraud, insider trading, and much else that has enabled them to become far richer.

This scourge must end. California’s proposed wealth tax is a good place to begin.

Efforts such as this also offer powerful reminders that even with Trump lording over America like a giant slug, positive change can and will still happen at the state (and city) level.

I’m frankly disappointed that Gavin Newsom has come out against the California wealth tax proposal. I delighted that Ro Khanna is in favor of it.

What do you think?