California is considering a one-time 5% percent wealth tax on billionaires in the state, courtesy of the Service Employees International Union (SEIU).
Congressman Ro Khanna, who represents the residents of Silicon Valley in Washington, D.C., has been a key national supporter of the proposal. Other national figures are endorsing the SEIU’s policy proposal, most notably Sen. Bernie Sanders, I-Vt.
The wealth tax proposal targets a tiny group of the mega-elite, with proponents claiming it can be used to fund health care and education initiatives in the state. But, before California voters buy into this “quick-fix” policy, they should look across the Atlantic.
Many European countries have been down this road before, and it has only led to dead ends, capital flight and even more unsustainable budgetary issues. Nine European countries have repealed their wealth taxes; only three European countries still implement one.
Take France, for example. The country had a wealth tax from 1982 to 2017, and government officials reported that over 10,000 millionaires worth a combined 35 billion euros left the country. French economist Eric Pichet estimates that the proposal did raise 3.5 billion euros a year; however, the government lost 7 billion euros from capital flight.
More recently, Norway experienced its own issues. Over 30 Norwegian billionaires and mega-millionaires left the country in 2022 — more than the previous 13 years combined. The plan was very similar to California’s proposal. The proposal was expected to raise $146 million in new revenue; however, over $54 billion of capital left the country, leading to a net loss of nearly $450 million.
There are many core issues with this policy. First is a practical one: Within a country, it is incredibly easy for people to “vote with their feet” and move to places that align with their preferences. In 2023, the Census Bureau estimates that nearly 7.5 million people moved from one state to another. Research suggests that people tend to move to places with lower taxes and a blossoming entrepreneurial environment.
Millions of people move a year, but it is even easier for the ultra-rich to move as residents, making California’s policy proposal a fool’s errand. Billionaires are disproportionately more likely to have secondary (or more) residences, making the idea of claiming residency in one state quite simple.
Continue reading at The Sacramento Bee.
Justin Callais, PhD, is Chief Economist at the Archbridge Institute. He leads the institute's "Social Mobility in the 50 States" project and conducts original research on economic development, upward mobility, and economic freedom. Dr. Callais received his Ph.D. in economics from Texas Tech University and his B.B.A. in economics from Loyola University New Orleans. He serves as an economic consultant at Callais Capital Management, and he is co-editor of Profectus Magazine, an online publication dedicated to human progress and flourishing. In addition, he publishes a regular newsletter on Substack titled "Debunking Degrowth."
Economics of Flourishing
California is considering a one-time 5% percent wealth tax on billionaires in the state, courtesy of the Service Employees International Union (SEIU).
Congressman Ro Khanna, who represents the residents of Silicon Valley in Washington, D.C., has been a key national supporter of the proposal. Other national figures are endorsing the SEIU’s policy proposal, most notably Sen. Bernie Sanders, I-Vt.
The wealth tax proposal targets a tiny group of the mega-elite, with proponents claiming it can be used to fund health care and education initiatives in the state. But, before California voters buy into this “quick-fix” policy, they should look across the Atlantic.
Many European countries have been down this road before, and it has only led to dead ends, capital flight and even more unsustainable budgetary issues. Nine European countries have repealed their wealth taxes; only three European countries still implement one.
Take France, for example. The country had a wealth tax from 1982 to 2017, and government officials reported that over 10,000 millionaires worth a combined 35 billion euros left the country. French economist Eric Pichet estimates that the proposal did raise 3.5 billion euros a year; however, the government lost 7 billion euros from capital flight.
More recently, Norway experienced its own issues. Over 30 Norwegian billionaires and mega-millionaires left the country in 2022 — more than the previous 13 years combined. The plan was very similar to California’s proposal. The proposal was expected to raise $146 million in new revenue; however, over $54 billion of capital left the country, leading to a net loss of nearly $450 million.
There are many core issues with this policy. First is a practical one: Within a country, it is incredibly easy for people to “vote with their feet” and move to places that align with their preferences. In 2023, the Census Bureau estimates that nearly 7.5 million people moved from one state to another. Research suggests that people tend to move to places with lower taxes and a blossoming entrepreneurial environment.
Millions of people move a year, but it is even easier for the ultra-rich to move as residents, making California’s policy proposal a fool’s errand. Billionaires are disproportionately more likely to have secondary (or more) residences, making the idea of claiming residency in one state quite simple.
Continue reading at The Sacramento Bee.
Justin T. Callais
Justin Callais, PhD, is Chief Economist at the Archbridge Institute. He leads the institute's "Social Mobility in the 50 States" project and conducts original research on economic development, upward mobility, and economic freedom. Dr. Callais received his Ph.D. in economics from Texas Tech University and his B.B.A. in economics from Loyola University New Orleans. He serves as an economic consultant at Callais Capital Management, and he is co-editor of Profectus Magazine, an online publication dedicated to human progress and flourishing. In addition, he publishes a regular newsletter on Substack titled "Debunking Degrowth."
Share:
Related Posts
Deregulate To Make Childcare Affordable Again
Missouri Can Grow Its Workforce By Rethinking Licensing Laws
Texas Can Reduce More Barriers to Occupational Licenses