Two economists studied California's billionaire tax.
asserted
economists → study → tax
They reached wildly different conclusions
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They → reach → conclusions
In 1978, California voters approved Proposition 13, a historic tax revolt that became an opening salvo in the Reagan revolution and its national movement to slash taxes.
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that → approve → taxes
Now, Californians are voting on Proposition 40, which could prove to be just as revolutionary — but in the opposite direction: it would create America's first-ever wealth tax targeted at billionaires.
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it → vote → billionaires
As Election Day approaches, economists have been duking it out over this proposed wealth tax.
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economists → approach → tax
It could provide a sort of nerdy preview of a coming national fight over taxing the superrich.
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It → provide → superrich
Will this wealth tax help rein in runaway inequality and fill the state's coffers — or will it convince billionaires to fire up their private jets and set up residence in mansions outside the state?
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it → help → state
Some megabillionaires have already fled California since the tax was proposed.
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tax → flee → California
On one side of this debate is economist Gabriel Zucman, a leading advocate for taxing the superrich who splits his time between UC Berkeley and the Paris School of Economics.
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who → lead → Economics
Zucman helped design the national wealth tax proposals of Senators Elizabeth Warren and Bernie Sanders when they were running for president (which I covered back then in the Planet Money newsletter and podcast).
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I → design → newsletter
He is the author of a new book with a blunt title: We Need To Tax Billionaires.
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We → need → Billionaires
Naturally, he supports California's wealth tax, and he co-authored an influential analysis estimating it could raise about $100 billion in revenue.
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it → support → revenue
"If California says, 'We can tax billionaires.
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We → say → billionaires
We can tax the wealthiest, most powerful people in the world,' it will be the beginning of not only a broader U.S.-wide movement, ultimately paving the way for a federal wealth tax — but I think it will be the beginning of an international movement," Zucman tells Planet Money.
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Zucman → tax → Money
His analysis, co-authored with Benjamin Jaros, comes to a wildly different conclusion: the tax could lead to an exodus of billionaires out of California, damaging the state's economy and blowing a hole in the income tax revenue the state already collects from billionaires.
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state → co → billionaires
It would not raise $100 billion for the state," Rauh argues.
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Rauh → raise → state
Instead, he estimates, this tax could actually end up draining California's state coffers.
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tax → estimate → coffers
We calculate that Proposition 40 would cost the state of California $39 billion."
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Proposition → calculate → billion
California voters are deciding whether to pursue a historic wealth tax experiment, which could influence tax policy around the nation, even the world.
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which → decide → nation
Indeed, the superrich, fearing that this wealth tax could spark a widespread movement, have poured a staggering $333 million into a group trying to defeat this proposition, according to a recent report in The New York Times.
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tax → fear → Times
The wealth tax Prop 40 proposes is pretty straightforward: a one-time, 5% tax on the net worth of billionaires, with some assets exempted.
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assets → propose → billionaires
It would apply retroactively to any billionaire who was a resident of California on January 1, 2026.
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who → apply → January
The money would be earmarked mostly for the health care of low-income Californians, to help offset federal cuts to Medicaid.
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money → earmark → Medicaid
A wealth tax is sort of like a property tax, except it extends beyond real estate and taxes a whole range of assets: stocks, superyachts, Basquiat paintings, dinosaur skeletons, Mercedes G Wagons, samurai swords, basically everything a rich person owns.
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person → extend → assets
Of course, figuring out what all a billionaire's stuff is worth — especially assets that rarely change hands —
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that → figure → hands
Do you value a Picasso or a yacht by the price originally paid, what it might sell for today, by how much they've insured it for?
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they → value → it
That said, most of the wealth held by California billionaires is in publicly traded stocks, whose value is easy to determine.
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value → say → stocks
Zucman, together with Jasper Boll and Emmanuel Saez, released an analysis of the California billionaire class and this proposed wealth tax.
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Zucman → release → class
"California billionaires' wealth has reached $2.3 trillion by mid-2026, as large as all the annual income reported on income tax returns of all Californians," they wrote.
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they → reach → Californians
They found that California billionaire wealth had exploded by 144% between 2023 and 2025, thanks largely to the AI boom.
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wealth → find → boom
"Over the longer run, the real wealth of California's billionaire class — the top 0.001% richest households — has been multiplied by 25 from 1982 to 2026, while average real family income in California has only doubled."
Zucman says a crucial problem with the existing tax system in California, America, and beyond is that the superrich have been seeing their wealth snowball bigger and bigger while paying relatively little in income taxes.
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wealth → multiply → taxes
Billionaires can structure their finances to generate little or no taxable income, making the income tax rate "totally irrelevant," he argues.
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he → structure → income
Zucman believes a wealth tax will help address this, thereby helping to fight rising inequality, counteract the political power of "the oligarchs," and raise much-needed funds for everyone else.
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tax → believe → everyone
Zucman, Boll, and Saez estimated that the state wealth tax proposed by Prop 40 could raise "about $100 billion, with comparatively minor impacts on income tax revenue."
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tax → estimate → revenue
They arrive at that figure by taking 5% of their $2.3 trillion estimate of billionaire wealth, then reducing the projected revenue by 10% to account for avoidance, evasion, and the possibility that some billionaires ended their California residency before January 1, 2026.
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billionaires → arrive → January
Rauh argues that this 10% reduction to account for billionaires avoiding the tax is too optimistic.
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billionaires → argue → tax
As we've previously reported in the Planet Money newsletter, wealth taxes have been tried before around the world and they have had a dismal track record.
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they → report → record
Even Zucman, a wealth tax champion, writes in his new book that past wealth taxes "by and large, have been abject failures."
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taxes → write → book
Zucman and his coterie of other (typically French) economists have spent a lot of time studying why past wealth taxes failed and have sought to design new ones that address those failures.
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that → spend → failures
One crucial problem was that wealth taxes tended to have loopholes that allowed the rich to shelter their assets, making these taxes a leaky bucket.
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taxes → tend → assets
…and 94 more, not listed.
The Aporia
