Economists Push Punitive Billionaire Tax, Threatening California’s Economy and Innovation
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A group of Nobel-winning economists has endorsed Proposition 40, a one-time 5% wealth tax on California billionaires, risking $100 billion in new taxes that could drive away investment and set a dangerous precedent for other states.
A letter signed by economists including Daron Acemoglu, Abhijit Banerjee, Peter Diamond, Esther Duflo, Paul Krugman, and Joseph Stiglitz lends academic cover to Proposition 40, a controversial proposal to impose a one-time 5% tax on the assets of California residents with net worth over $1 billion. The signatories point out that the state’s 250 billionaires hold about $2.3 trillion in wealth, but state income taxes have only captured 1.6% of the projected $1.4 trillion increase in wealth from 2019 to 2025—ignoring the fact that this wealth drives California’s economy and funds innovation.
“California is the right place to take this historic step,” the economists wrote, seemingly unconcerned with the risks of targeting the state’s most successful citizens and further entrenching California’s reputation for hostility toward business and achievement.
Proponents, including the powerful Service Employees International Union-United Healthcare Workers West, claim the tax could raise $100 billion to offset federal reductions in healthcare spending. They insist the tax won’t threaten Silicon Valley’s dominance, citing high venture-capital inflows since 2026, but ignore the real risk that such punitive measures will drive entrepreneurs and investors out of the state.
Opponents warn that the tax could cripple economic growth and force founders to liquidate large portions of their companies, harming job creation and innovation. Governor Gavin Newsom opposes the measure, recognizing its dangers, while Representative Ro Khanna supports it but warns against taxing illiquid or voting shares. Even some unions share the governor’s concerns. Tech leaders are split: Nvidia CEO Jensen Huang is “perfectly fine” with the tax, but Google co-founder Sergey Brin has contributed over $100 million to the opposition, highlighting deep divisions among the state’s business elite.
The economists claim that if California adopts this tax, it could trigger a wave of similar measures nationwide and even internationally, threatening to undermine the incentives that drive economic growth and prosperity. A recent Public Policy Institute of California poll shows 52% of likely voters support the tax, while 46% oppose it, and competing measures to limit or ban new taxes on financial assets also enjoy majority support—demonstrating widespread skepticism about the wisdom of targeting wealth creators.