California moves to levy a one-time 5% tax on billionaires' assets

Nov. 3 ballot measure targets up to 250 people, aims to raise $100 billion

Google co-founder Brin pumps $100 million into opposition effort

Democratic Gov. Newsom also opposes measure, citing 'wealth exodus' fears

Union members rally in Los Angeles, California, on Sunday (local time), holding signs reading "Billionaire Tax Now" to demand the introduction of a billionaire wealth tax. [AFP]
Union members rally in Los Angeles, California, on Sunday (local time), holding signs reading "Billionaire Tax Now" to demand the introduction of a billionaire wealth tax. [AFP]

If your net worth is $1 billion, you would owe roughly $50 million in a single tax payment. At $10 billion, the bill climbs to around $500 million.

California — home to more billionaires than any other US state — has ignited fierce debate with a proposal to impose a one-time 5% levy on the fortunes of the ultra-wealthy. Supporters say taxing up to 250 billionaires could raise as much as $100 billion, but Silicon Valley's richest are fighting back hard, warning the measure would drive wealthy residents to other states.

California will put the so-called billionaire tax to a public vote on Nov. 3, requiring residents with a net worth of $1 billion or more to pay a one-time levy equal to 5% of their total assets, Reuters reported Thursday (local time).

Up to 250 people would be subject to the tax, and their combined wealth is estimated to exceed $2 trillion. California, which encompasses Silicon Valley and its concentration of the world's largest technology companies, has more billionaire residents than any other state.

Proponents say the tax could generate roughly $100 billion, with proceeds earmarked for healthcare, education and food assistance. The argument is that a single levy on a tiny slice of the ultra-wealthy's fortunes would be enough to fund large-scale welfare programs.

Public opinion remains closely divided. A poll in August showed 48 percent of voters in favor and 41 percent opposed. A September survey put support at 52 percent and opposition at 46 percent. Neither side can yet claim a clear advantage.

Silicon Valley billionaires are pushing back hard. Among the most prominent opponents is Google co-founder Sergey Brin, who has committed more than $100 million to efforts aimed at blocking the measure.

Brin has invoked his childhood experience of fleeing the Soviet Union with his family to make his case against the tax. He said his family left in 1979 to escape socialism and that he knows firsthand how destructive and oppressive that system was.

California Governor Gavin Newsom, a Democrat, also opposes the billionaire tax. He has said that rather than taxing the ultra-wealthy in California alone, the country needs a federal-level system that applies uniformly across all states.

The opposition's biggest fear is a "wealth exodus." Critics argue that if billionaires relocate to low-tax states such as Texas or Florida to avoid the steep one-time bill, California could collect more revenue in the short term but see its long-term tax base and investment climate weaken.

The departure of even a single billionaire could have an outsized impact on state revenues. Because high earners shoulder a disproportionate share of California's income tax, opponents argue that losing the ultra-wealthy would mean not just forgoing this one-time wealth levy but also reduced income and capital gains tax receipts for years to come.

Supporters counter that such concerns are overblown. They argue that Silicon Valley's corporate ecosystem, talent pool, universities and research institutions represent competitive advantages that cannot be replicated simply by moving to a lower-tax state. They also contend that a single 5% levy is hardly an excessive burden given the strong growth in billionaires' wealth.

The debate over wealth taxes is not unique to the United States. Several European countries once taxed the net worth of the wealthy, but France, Germany and Sweden abolished or scaled back their regimes, citing capital flight, tax avoidance and the difficulty of valuing assets for tax purposes. Norway and Switzerland, however, still maintain wealth taxes.

The November ballot measure will serve as a test of competing priorities: extract more from the wealthy to fund social programs, or keep them in the state to protect tax revenues and investment. If California's billionaire tax becomes reality in the country's largest state economy, it is likely to have significant ripple effects on the broader US debate over taxing the wealthy.


sjy@heraldcorp.com