Source: Fortune
Summary
Emil Barr, a 23-year-old millionaire and founder of Flashpass, initially planned to move to San Francisco but canceled the move after considering California’s regulatory and tax environment, including a proposed billionaire wealth tax. He cited concerns about the state’s “anti-entrepreneurial” rhetoric and fears that the tax could expand to include millionaires. Barr said he would not build a business in California, though he still has ties to the state. Supporters of the tax, including Nobel Prize-winning economists, argue it would fund healthcare and public services without deterring investment.
Our Reading
The numbers tell one story.
Barr moved to Ohio after reconsidering California’s tax climate.
He fears the proposed wealth tax could expand to millionaires.
Supporters say the tax would fund healthcare and public services.
California’s debate reflects a national conversation about taxing wealth.
Author: Evan Null
A billionaire tax, a millionaire’s cold feet
Flashpass builds technology that helps government agencies connect people with work, including people displaced by AI, Barr said. He moved to Columbus because Ohio was the first state to use its software. San Francisco initially appealed to Barr as the place to be because it’s closer to investors and AI companies. He hadn’t decided whether to move Flashpass’s headquarters there, but planned to relocate himself—until California’s regulatory and tax climate changed his mind.
“I’m not 100% sure I’m going to stay in Ohio and keep building the business in Ohio,” Barr said. “But I am 100% sure that I wouldn’t build a business in California.” He argues that political hostility toward entrepreneurs could discourage them from building businesses beyond California too. “If we keep villainizing entrepreneurs, entrepreneurs aren’t just going to leave California; they’re going to leave America,” Barr said.
His decision hasn’t ended his company’s California ties altogether, though. He says Flashpass still has employees and investors there, and he continues traveling to the state. He also leaves room for higher taxes, while arguing that the approach matters. “Maybe the solution is paying higher taxes and updating the tax code, but it needs to be done in a more nuanced, progressive way,” he said, declining to suggest any specifics.
Barr isn’t alone in opposing it. Gov. Gavin Newsom opposes the measure, and Google cofounder Sergey Brin has helped fund the opposition. The debate reflects a larger national discussion about how to balance taxation, investment, and public services.
Supporters argue the tax would fund healthcare and public services without deterring investment. They point to Massachusetts and Washington as examples where high taxes on the wealthy have not led to significant departures. The measure would direct 90% of its revenue to healthcare, and the Legislative Analyst’s Office estimates it would raise tens of billions over several years.
Why supporters dispute the investment threat
Not every billionaire sees the proposal as a reason to reconsider California as a whole. In a January Bloomberg podcast, Nvidia CEO Jensen Huang said he was “perfectly fine” with the proposed tax, pointing to Silicon Valley’s talent pool as the reason the company works there. Debru Carthan, vice president of SEIU-United Healthcare Workers West, the union backing the measure, rejected concerns that the proposal would drive away wealthy residents or investment.
The campaign argues the tax would help replace roughly $100 billion in federal healthcare funding it says California will lose over five years. “This scare tactic just doesn’t stand up to scrutiny,” she said in a statement to Fortune. “There’s more money and investors coming into California now, not less.”
Carthan pointed to Massachusetts and Washington, arguing that their taxes on wealthy residents have raised billions for public services while their high-income populations have continued to grow. Those policies differ from California’s proposed one-time wealth tax, but the union presents them as evidence against predictions of an exodus.
She argued that the more immediate threat is the loss of federal healthcare funding. “That’s the real crisis our state is facing,” she said, warning that without additional funding, clinics would close, hospitals would lay off workers, and Californians could lose coverage or face higher premiums.
The measure would direct 90% of its revenue to healthcare. The nonpartisan Legislative Analyst’s Office estimates it would raise tens of billions of dollars over several years. It also expects taxpayer responses, including some departures, could reduce ongoing income-tax revenue by less than $1 billion annually.
What migration research can—and can’t—tell us
Cornell sociologist Cristobal Young, who has spent nearly two decades studying how taxes affect migration among high earners, says fears of wealthy people fleeing higher taxes are often exaggerated. “The more money you make, the less likely you are to move,” Young told Fortune.
Successful high earners tend to live where they built their careers, with business partners, professional networks, and family ties that make moving costly. “All of a sudden, you’re in a new professional environment, and now you’re more of an outsider,” he said.
Young also said that people’s objections to a state’s taxes do not always explain where they actually live or start a business. Their existing roots, business partners, and customers can matter more. He began studying tax migration using New Jersey tax returns after its 2004 income-tax increase on high earners. Even with lower-tax Pennsylvania nearby, he said, the research did not find the departure pattern critics feared.
A 2016 study he coauthored, examining 45 million tax records over 13 years, likewise found limited millionaire tax flight. But Young said those findings don’t necessarily predict what would happen in California. A large tax on accumulated wealth differs from adding a few percentage points to annual income taxes.
“We haven’t passed a tax like this before in the U.S.,” he said. He said the spread of taxes on high earners across states also matters because as more states adopt them, moving to avoid them becomes less straightforward.
