The California Wealth Tax Debate

This November, voters in California may have the chance to vote to impose a one-time wealth tax on the state’s billionaires. Here’s how the New York Times describes the proposal:

The initiative would require Californians with a net worth beyond $1.1 billion to pay a one-time tax equal to 5 percent of their assets, while those worth between $1 billion and $1.1 billion would pay a smaller percentage. It would apply retroactively to anyone who was living in California as of Jan. 1, 2026, and taxpayers could spread their payments across five years starting in 2027.

The [SEIU] figures that California is home to approximately 200 billionaires who would have to pay the tax.

The state would be required to spend 90 percent of the new revenues on health care, with the rest devoted to food assistance and education. The health care workers union argues that the tax is necessary to make up for federal cuts to Medicaid, Affordable Care Act subsidies and food assistance that President Trump signed into law last year.

California’s nonpartisan legislative analyst and the governor’s Department of Finance estimated in a joint review that the tax would deliver tens of billions of dollars in one-time money for the state, but that it could lead to hundreds of millions or more in continuing losses from billionaires leaving California to avoid the tax.

The proposal has generated intense debate even though it isn’t even on the ballot yet. Some of California’s billionaires claimed they were leaving the state before the end of last year so they would not be subject to the tax. Others have vowed to stay and fight the proposal, pouring millions into efforts to block it. Still others, like Nvidia’s CEO Jensen Huang, say it’s not that big of a deal. The state’s Governor, Gavin Newsom, has come out against the tax, while some other California politicians, like Congressman Ro Khanna, have endorsed it.

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Wealth taxes are a topic that’s near to my heart. My first job in politics was working as an economic adviser to Senator Elizabeth Warren. As she launched her 2020 presidential campaign, I worked with her and with outside experts like Emmanuel Saez and Gabriel Zucman at Cal-Berkeley to develop the wealth tax that became one of her signature proposals. That tax—originally a 2% tax on any assets above $50 million—was projected to generate about $3 trillion in revenue over ten years, which was enough to cover the cost of several of her proposals, including universal child care, student debt relief, and more.

There are several key differences between the California proposal and the original Warren proposal I worked on. The California proposal is only applied to California residents, not nationally (duh); and it’s retroactive and applied once, rather than applied annually. A state-level wealth tax also raises different legal issues than a federal one.

As tech billionaires and others take aim at the California proposal, I thought it would be fun to interview one of the authors of the proposal. David Gamage, who is a leading tax law professor at the University of Missouri, helped design the California proposal and has written extensively about wealth taxes. There’s hardly anyone in the country more knowledgeable about the proposal and wealth taxes in general. If you’re interested in this debate, I hope you’ll join me at 1:30pm today as I chat with David about the California proposal, the critiques leveled against it, and the prospects for other state-level (or even national) wealth taxes in the years to come.

If you have any question you’d like me to ask David, feel free to leave them in the comments and I will try my best to get to them in the time we have.