A tax meant to raise billions could cost the state billions
The Stanford economists’ warning reveals how the promise of wealth redistribution is undercut by the same people it aims to tax.
The story
Stanford economists warn that California's proposed billionaire tax could result in a $39 billion loss instead of a $30 billion gain, due to potential billionaire departures and lost future tax revenue.
Source: fortune.com
Our reading
The Stanford economists’ calculation hinges on a simple truth: billionaires can move. But the real story is how the tax’s design assumes they won’t. The proposed tax is based on residency as of Jan. 1, 2026, which means that even if a billionaire announces they’re leaving, they might still owe the tax if they were still a resident on that date. It’s like a parking ticket that’s only valid if you’re still in the lot when the meter runs out.
The economists’ model assumes that the tax will be paid, and that the departures will be permanent. But the people who stand to lose the most—California’s state budget—have no way of knowing which billionaires will stay and which will go. It’s a gamble, and the stakes are huge. The tax is a one-time event, but the losses it triggers are ongoing, like a debt that keeps compounding.
The result is a kind of economic tightrope walk. The state is trying to collect a windfall, but the very people it’s trying to tax might walk away, taking future tax revenue with them. It’s not just a question of money—it’s a question of who gets to decide what’s fair, and who gets to pay.