California's "billionaire tax" is the wrong approach
Noah Smith
· Noahpinion
· May 02, 2026 at 22:36
· ⏱ 5 min read
| Read on Substack ↗
Summary
Noah Smith argues that California's proposed one-time 5% billionaire tax is poor policy despite his support for higher top-end taxation. The tax is unpredictable, cannot fund ongoing programs sustainably, and would likely drive billionaires out of state, undermining revenue. For markets, this is a policy debate with no direct tradeable implications.
•California's proposed 'billionaire tax' is a one-time 5% levy on net worth over $1 billion, not a recurring tax.
•The revenue would be spent over five years on health care, education, and food assistance, creating a funding time bomb.
•A one-time tax creates uncertainty and sets up future political battles, akin to temporary federal tax cuts or debt ceiling increases.
•States cannot borrow to cover budget holes, making one-time levies especially risky compared to ongoing tax rate increases.
•Young et al. (2016) found that millionaires move little in response to state tax hikes, but Moretti & Wilson (2023) found that about 35% of Forbes 400 billionaires move when a state imposes an estate tax.
•Smith advocates for simply raising tax rates on the super-rich, as done in Europe or Massachusetts, rather than one-time confiscations.