Late yesterday the Associated Press finally called an end to Prop. 40 aka the California Wealth Tax. Despite oodles of free media coverage and the best possible environment for progressives, the wealth tax failed.
California voters rejected a billionaire tax, The Associated Press determined on Monday, rebuking a measure that would have created the nation’s first wealth tax by targeting the assets of residents with a net worth beyond $1 billion...
The Democratic voters who dominate the California electorate generally support the concept of making wealthy people pay higher taxes. But Democratic leaders were divided over the proposal — Gov. Gavin Newsom opposed it while the California Democratic Party endorsed the tax. And some of the California billionaires who stood to pay the tax contributed heavily toward a campaign that slammed the proposal with attack ads on TV throughout October...
The failure of the billionaire tax in California, a liberal state, is likely to be used as evidence for years to come that Americans will not stomach similar wealth taxes. The concept is expected to come up during the 2028 presidential campaign, and Mr. Newsom has already said he would be interested in a national wealth tax but not one only in his own state.
Proponents of the tax, like economist Gabriel Zucman, were quick to blame its failure on the opposition of billionaire opponents. Even NPR is having a hard time buying that.
"The money spent by the billionaires was critical," Zucman says. "Anyone who lives in California has been carpet-bombed by a deluge of ads. One can easily see how this could be pivotal in such a closely contested ballot."
But didn't Democrats win plenty of races this cycle despite huge sums spent against them? In Texas, for example, Elon Musk alone poured more than $150 million into defeating Democrat James Talarico. And Talarico ended up winning his Senate race by a comfortable margin. Why would money have been so decisive with Prop 40 and not in other races around the nation?
Republicans did indeed have a money advantage this year and it just didn't matter. But of course Zucman's whole approach is demonizing billionaires. The whole basis of this tax was the idea that people hate billionaires so much they'll gladly vote to punish them with a wealth tax. But it didn't happen. So Zucman is just doing what he does best, blaming the billionaires, instead of giving actual voters any credit for seeing through the bad design of his wealth tax.
Of all the progressive arguments in favor of a wealth tax, the most clear-cut was supposed to be the popularity of such a policy. Even people who may not vote for Democrats would support such a tax, the thinking went, out of frustration with the opulence and power of the ultrarich.
And then voters in California rejected what would have been the nation’s first tax on wealth...
“The conditions were probably the best they could have been to get this to pass, and even then it failed,” said Antoine Levy, an economist at the University of California, Berkeley. “That suggests there is a reluctance to pass wealth taxes.”
But progressives aren't going to let this go. What they love most about the wealth tax is that they can avoid threatening to raise taxes on middle-class people, something they have learned over many years is deeply unpopular. Raising taxes on everyone would be absolutely necessary if they really wanted to pass Medicare for All or many of their other big dollar spending projects. But they don't care about reality, they care about winning. And winning requires promises not to raise normal people's taxes. Focusing a tax solely on billionaires is an ideal solution for them, no matter how long it takes to win over their voters.
“It’s always complicated, it always take a little time,” said Gabriel Zucman, an economist at the University of California, Berkeley and a proponent of a wealth tax. “It’s just slowing down what I think is a pretty much inevitable evolution.”
There's nothing inevitable about it. Californians rejected the wealth tax because it was obviously loaded down with gimmicks and not a long-term solution for the problems we face. All you have to do is read the comments. There are many California progressives who voted against this because they could see it for what it was.
I voted against it not because I don’t think we need higher tax rates for the obscenely wealthy. I voted against it because it was a one-time tax as opposed to a structural, ongoing plan and because the funds allocation was pre-determined (ie healthcare for union members) vs allowing a discussion of the best uses of the funds.
Another one:
Prop 40 was a one-time tax that would have accomplished virtually nothing. What California voters will approve is to raise the tax rates to fair levels for everyone, and eliminate the loopholes the rich use to avoid paying their fair share.
And one more:
I’m firmly in favor of taxing the wealth, in addition to income, of the super rich, but I voted against this bill because it was poorly conceived. We need a regular, every year tax, not a one-time shot that will allow folks to say the job is done. Back to the drawing board, progressives, and do it right next time.
The "one time" promise was a) a lie and b) meant to convince billionaires they didn't need to leave the state. This thing may have actually passed if it had promised the same tax every year, but then it also would have resulted in most of the billionaires leaving the state. The impact on the tax base would have been dramatic.
No matter how you slice it, this tax was never going to work. That won't stop progressives from bringing it up again in 2028. But they'll have to start somewhere else next time. California also passed Prop. 42 which outlaws wealth taxes. Maybe they should try to pass this in Massachusetts or New York first.
