Billionaires and their closest allies recently launched a full-court press against California’s proposed wealth tax, which would levy a one-time 5% tax on billionaires’ net worth. Google co-founder Sergey Brin, now worth nearly $300 billion, likens the tax to Soviet oppression and has spent roughly $57 million to oppose it. He and a few fellow billionaires are even threatening fleeing the state to avoid it.
Some critics of the proposed tax argue that it’s poorly designed, that there is no reliable way to assess taxable value of assets other than cash and that wealth taxes generally have high administrative costs and disappointing revenue. Other detractors raise fears that this one-time assessment could become permanent, or eventually be applied to nonbillionaires, including pension and retirement benefits for working-class Americans.
But you have to wonder what all the fuss is about, since any billionaires who pay the tax will earn it back in just a few months. Money begets money, and 50% rates of return aren’t unusual for the ultra-wealthy. Compounded over 20 years, that turns $1 million into $3.3 billion. Want to verify that? Simply pull up your calculator, multiply a million by 1.5, and then repeat that 19 more times.
California’s proposed wealth tax would do virtually nothing to stop this level of wealth accumulation. “Unrealized gains” remain otherwise untaxed, and billionaires still have all kinds of ways to avoid triggering a taxable event, keeping them unrealized.
Working Californians on the other hand have taxes withheld before their paychecks ever reach their bank accounts. Apart from tax-qualified retirement plans, everything in their savings comes from after-tax income. Federal, state and payroll taxes on what they earn, save and invest amount to about 40%.
Billionaires’ taxes amount to zero. So long as they don’t sell any of the shares that made them rich, they’re not actually forced to pay taxes on the skyrocketing value of those shares. A “wealth tax” worthy of the name would ensure they pay the same as the rest of us, around 40%. That would not prevent them from amassing fortunes. Their $1 million would still grow to $190 million over 20 years — which is colossal, just not as colossal as $3.3 billion.
Another way to express this is that billionaires’ fortunes are more than 90% attributable to unpaid taxes. In California, more than 30% of their fortunes is attributable to not paying state taxes, year after year. A one-time 5% wealth tax would hardly make a dent in that.
In fact, it could be argued that billionaires’ wealth isn’t theirs at all. It really belongs to the federal and state governments deprived of the taxes that would have been paid if billionaires were taxed like the rest of us. Ordinary taxpayers have to make up for those lost revenues that cover the costs of vital public services including healthcare, education and food assistance programs.
The tax structure that enables this has turbocharged economic inequality, leaving working Americans struggling to pay their bills and their taxes. Whatever happens with California’s ballot initiative, we need reform in states across the country as well as at the federal level.
States have the power to tax wealth and unrealized gains. There is a complicated debate about whether it is constitutional for the federal government to do so, though there are ways it could tax realized gains to make up for lost revenues from unrealized gains. A Billionaire Minimum Income Tax proposal is pending in Congress, drawing on the work of several drafters of California’s wealth tax proposal. A similar proposal was introduced in the Vermont state legislature.
A sensible guiding principle here is to figure out how much of accumulated wealth is attributable to not paying taxes, and then set rates accordingly. For example, if 90% of Brin’s approximately $300-billion fortune comes from not paying taxes on unrealized gains, any income he realizes ought to be taxed at 90%. If Brin wanted to spend, say, $57 million on his campaign to defeat California’s wealth tax, he would need to sell or otherwise monetize $570 million (about 0.2% of his fortune) and pay 90% of it in taxes to have a lobbying war chest of $57 million left over.
What would be so wrong about limiting the massive wealth and influence of billionaires in this way? As things stand now, 90% of what Brin spends is the public’s money, and a large chunk just got spent on trying to keep the public’s money away from the public.
Something’s got to give. Roughly 900 U.S. billionaires — 0.00026% of the population — own somewhere around $7 trillion to $8 trillion. They have all that money, but the rest of us have the votes. Once we understand how billionaires’ wealth comes out of our pockets, we can pass tax reforms to fix the problem, and Brin and his ilk will be nostalgic for the days when all they had to worry about was a one-time 5% state tax on their wealth.
Stephen Land is a retired tax attorney and former chair of the New York State Bar Assn.’s Tax Section.
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Ideas expressed in the piece
- The article argues that the uproar among billionaires over California’s proposed 2026 Billionaire Tax Act, which would impose a one-time 5% tax on net worth over $1 billion, is overstated because such an assessment would barely slow the pace at which very large fortunes grow and could be earned back in a relatively short time given the high returns often available on massive pools of capital[2][4].
- It contends that the real inequity lies in how the tax system treats “unrealized gains”: while ordinary workers have federal, state and payroll taxes withheld from each paycheck and typically face combined rates around 40% on what they earn and save, billionaires can allow their wealth—often concentrated in appreciated stock—to grow without selling and thus without triggering income tax liability, resulting in effective tax rates of zero on much of their gains[4].
- The piece suggests that a genuine wealth tax would treat this untaxed appreciation as the functional equivalent of income and target an effective rate comparable to what ordinary earners pay, arguing that if something like 90% of a billionaire’s fortune reflects gains that have never been taxed, then the tax system should be designed so that, when those gains are eventually realized or monetized, up to 90% could be reclaimed through taxation.
- Building on this logic, the article maintains that a substantial share of billionaire fortunes can be understood as public revenue that was never collected, especially at the state level in places such as California, and that the burden of funding healthcare, education and food assistance has consequently shifted onto ordinary taxpayers who lack the ability to defer income or reclassify it as unrealized gains[2][4].
- It characterizes California’s one-time 5% billionaire wealth tax as a very modest corrective that would barely “dent” fortunes built overwhelmingly on untaxed appreciation, especially when compared with the far higher ongoing tax rates borne by wage earners; the column argues that, in this context, billionaire complaints and threats to move out of state amount to an effort to preserve outsized privileges.
- The article cites examples of ultra-wealthy tech figures spending tens of millions of dollars to fight the measure and frames that political spending as effectively financed with money that would otherwise have supported public needs, arguing that a tax regime that allowed far less compounding on untaxed gains would also limit the political clout that comes with such lobbying war chests.
- Looking beyond California, the piece calls for broader reforms at both the state and federal levels—pointing to proposals such as a federal Billionaire Minimum Income Tax and state experiments like those considered in Vermont—as steps toward taxing extreme wealth and unrealized gains more consistently, a direction also favored by advocates who see billionaire taxes as crucial to preventing cuts to Medicaid and other core services[4][6].
- Ultimately, the article urges voters to recognize that a tiny fraction of the population controls trillions in wealth and to use democratic power to reshape the tax code so that billionaires contribute at rates at least comparable to everyone else, asserting that if such reforms were enacted, the current controversy over a one-time 5% California tax would look, in hindsight, like a relatively minor issue.
Different views on the topic
- Critics of the 2026 Billionaire Tax Act argue that the proposal is fundamentally unfair because it would operate retroactively, reaching back to tax the wealth of individuals who have already left California and no longer reside there; a congressional proposal dubbed the Keep Jobs in California Act has been introduced specifically to prevent states from imposing retroactive wealth taxes on former residents, reflecting concerns that the measure amounts to “chasing down” people who departed due to prior policy decisions[1][2].
- Tax attorneys and policy analysts note that the initiative’s broad definition of “applicable individuals,” including residents and part-year residents with ties as far back as January 1, 2025, raises serious constitutional questions under state due process protections and the limits on a state’s authority to tax nonresidents without current nexus, and warn that the measure, if enacted, will almost certainly provoke complex and costly litigation whose outcome is uncertain[2][5][6].
- Opponents also contend that wealth taxes around the world have repeatedly underperformed revenue projections and have often been scaled back or repealed; a Cato Institute analysis, citing work by Hoover Institution economists, argues that projected revenues from California’s one-time 5% billionaire tax are overstated and that realistic assumptions about taxpayer behavior—including migration and tax planning—suggest the state could collect far less than advertised[3][5].
- In that vein, fiscal conservatives warn that because the top 1% of taxpayers already contribute more than 40% of California’s personal income tax receipts, even a modest exodus of high-net-worth individuals in response to a wealth tax could shrink income tax collections, potentially leaving the state worse off and forcing higher taxes or service cuts for those who remain[2][3][5].
- Business groups and some economists argue that imposing a wealth tax on top of already high income and capital-gains tax rates would further damage California’s competitiveness, reinforcing perceptions that the state is hostile to entrepreneurs and investors and accelerating an existing trend of prominent business leaders and companies relocating to lower-tax jurisdictions[1][2][5].
- Tax-policy skeptics emphasize the practical difficulties of implementing a wealth tax, particularly the challenge of valuing illiquid assets such as closely held businesses, startups, private equity stakes and intellectual property; analysts have noted that the initiative would cap annual reimbursements for administration at levels far below prior estimates of what robust wealth-tax enforcement would cost, raising concerns about accuracy, compliance, and unequal treatment of similarly situated taxpayers[2][3][5].
- Some legal scholars and commentators further warn that efforts to tax unrealized gains, whether through state wealth taxes or federal minimum taxes on billionaires, raise unresolved constitutional issues and could invite protracted litigation; they caution that focusing political attention on extracting more from a very small group of ultra-wealthy taxpayers risks obscuring the broader budgetary reality that sustaining or expanding public programs would likely require more general tax increases, including on middle-income households[3][6].
