California's Proposition 40 appears headed toward defeat as votes are counted

Zucman says a 5% wealth tax would yield $100 billion from billionaires

California’s Proposition 40 appeared headed toward defeat on Nov. 9, with vote counting still underway, as economist Gabriel Zucman defended taxing the wealth of billionaires rather than relying only on annual income. Speaking with NPR’s Steve Inskeep from Paris, Zucman said a modest one-time tax could collect $100 billion and still work without producing large-scale relocation.

The discussion centered on two state-level votes. Washington voters chose to keep the state’s millionaire tax, an income tax on people making more than $1 million per year. California voters appeared to reject Proposition 40, a tax on the total wealth of billionaires, although the count was not final.

Zucman, an economist who studies taxes on the super-rich and wrote We Need To Tax Billionaires, said there is substantial demand for taxing the super-rich in the United States and globally. He attributed that demand to the growth of fortunes at the top and to billionaires paying much less tax than the rest of the population.

California billionaires spent almost $400 million to defeat Proposition 40, Zucman said. Inskeep asked whether that spending, if economically rational, meant they expected to owe more. Zucman said yes: the billionaires would have paid $100 billion, making $400 million modest by comparison. The billionaires were also concerned, he said, that a modest one-time 5% tax could begin a movement for a national wealth tax and eventually an annual wealth tax.

Inskeep contrasted Washington’s more familiar income tax, which applies to reported income with adjustments above $1 million, with a tax on total wealth. The difference matters because, when wealth exceeds $1 billion, it is very easy to structure it so it generates little or no taxable income, Zucman said. In his view, that limitation makes income taxation insufficient for the super-rich and points to taxing wealth itself.

He also answered whether a wealth tax could work if passed by only one state: it could.

The rate would shape the response, Zucman said. A very high annual rate could cause some billionaires to move, while a modest rate could work without prompting widespread departures. Zucman said academic research shows migration is not zero but tends to be very limited. Billionaires, he said, agitate and threaten to leave for low-tax states.

Zucman said even a relatively small tax could generate billions of dollars because wealth at the top is now so large. He cited California’s 250 billionaires, who own about $2.3 trillion in wealth. That amount is about as large as the total income reported by all California families on their individual income-tax returns, he said.

His revenue comparison was direct: “So you get as much money with a 5% tax on the wealth of billionaires as with a 5% income tax for everybody.” The example applied the same 5% rate to billionaire wealth and to income broadly.

Zucman also addressed people who oppose taxing the rich because they are ambitious and want to become millionaires themselves. If billionaires paid more, he said, other residents could pay a bit less in taxes or benefit from more public services. Either possibility could make it easier for them to build wealth and become rich.

Zucman was not writing off the policy as California’s count continued. He said he was not extremely surprised that Proposition 40 was heading toward defeat, but expected a wealth tax to pass eventually, perhaps in 2028 or later. The vote remained unsettled, while his argument was that a modest wealth tax could produce substantial revenue even if migration remains limited.