Did California lose Larry Page? The Google and Alphabet co-founder, who left his day-to-day operations in 2019, has seen his net worth soar in the years since, from around $50 billion at the time of his departure to around $260 billion today. (Leaving his job clearly didn’t hurt his wallet.) Last year, a ballot measure in California threatened billionaires like Page with a one-time 5 percent wealth tax, prompting some of them to consider leaving the state before the end of the year, when the tax, if passed, would take effect retroactively. Page appears to have been one of these defectors; The Wall Street Journal reported that he recently spent more than $170 million on two homes in Miami. The article also noted that its co-founder, Sergey Brin, could also become a Florida man.
The Google guys, once Californian icons, are just two of the approximately 250 billionaires subject to the plan. It’s not clear whether many of them went to Florida, Texas, New Zealand or a space station. But it’s clear that many vocal billionaires and other very wealthy people are publicly losing their minds over the proposal, which will appear on the November ballot if it garners about 875,000 signatures. Hedge fund tycoon Bill Ackman describes it as “catastrophic”. Elon Musk, the richest man in the world, boasted that he already pays a lot of taxes, so much so that one year he asks for his tax return broke the IRS computer.
Yet when considered as a percentage of income, even the large sums paid by some billionaires are far lower than the tax rates many teachers, accountants and plumbers pay each year. If Musk, currently worth an estimated $716 billion, were to pay a 5% wealth tax, he would likely get by with a nest egg of $680 billion, enough to buy Ford, General Motors, Toyota and Mercedes, and always remains the richest person in the world. (It’s sheltered from California taxes anyway; a few years ago he moved to Texas.)
California politicians, including Governor Gavin Newsom, are generally opposed on the initiative. One glaring exception is Rep. Ro Khanna, who told WIRED in a statement that he’s on board with “a modest billionaire wealth tax to address staggering inequality and to ensure people have access to health care.”
Khanna could pay the price for going after the rich and could face a main challenge supported by the oligarchs because of that. A safer position for Bay Area politicians is that taken by San Jose Mayor Matt Mahan. He recently posted a tweet opposing the bill, saying that if California passed the wealth tax, it would cut off his nose, despite his face. When I talk to Mahan, he points out the risk that California will be left alone to tax the net worth of billionaires. “This puts at risk our innovation economy, which is the true engine of economic growth and opportunity,” he said. (Mahan is not very rich, but he is close to billionaires: he was once CEO of a business co-founded by former Facebook president Sean Parker.)
Because of the mobility of the wealthy, California has real concerns about the impact of a wealth tax. Not being a billionaire myself, I find the idea puzzling: moving away from your ideal home simply to avoid a tax that has no impact on your life situation seems, in Mahan’s words, like cutting off your nose to spite your face.
Furthermore, I don’t see why an exodus of billionaires necessarily means the end of Silicon Valley as the heart of technological innovation. If you want become For a billionaire, there’s no better place than the Bay Area, with an ecosystem that nurtures innovative businesses. That doesn’t change. A few years ago, tech people moved to Miami, saying it was going to become the new Silicon Valley. That this did not happen.
Still, some billionaires appear determined to leave, which would effectively make a national wealth tax counterproductive. If we want to tax billionaires fairly, it would seem best to handle it at the national level. Indeed, Sen. Elizabeth Warren and a number of lawmakers in the House and Senate have exactly this idea in mind. THE “Ultramillionaires Tax Law” First proposed in 2021 and reintroduced early last year, it would impose a 2% tax on household net worth over $50 million, with a 1% surtax on wealth exceeding $1 billion.
Don’t hold your breath waiting for this to pass from the same Congress that just gave the giant a green light tax cuts for the rich while itend health care subsidies for the masses. It’s unlikely that any legislature, state or local, will do what Mahan and others suggest: close the loopholes that allow the wealthy to avoid their fair share of taxes. Consider the most glaring loophole, the carried interest provision that allows hedge fund managers to pay low rates on management fees. Everyone agrees it’s a scam, even Donald Trump I swore to end it– and yet he always escaped the sunset. The rich use their wealth as a weapon to deceive lawmakers.
This is why California’s wealth tax is so threatening to the wealthy. A ballot initiative goes directly to the people. In our A K-shaped economy, Struggling families are constantly reminded that the wealthy are enjoying themselves while paying taxes at a lower rate than workers. Even more infuriating, many modern Daddy Warbucks types seem to take this as their due. Their role model is the President of the United States, who boasts about paying as little taxes as possible. When Hillary Clinton mentioned during a 2016 debate that her opponent paid no taxes in some years, Donald Trump said, “That makes me smart.” And that makes ordinary taxpayers…idiots?
The proposed wealth tax vote is not an act of genius. It’s a blunt instrument with some glaring flaws. For example, it is possible that some people are billionaires on paper with overvalued shares in a company – they would still have to pay full price. Others may have to sell their shares prematurely. And of course, there’s the fact that billionaires can avoid taxes altogether by leaving the state.
But rational objections may well be overwhelmed by voter frustration. Putting a wealth tax on the ballot—where lobbyists and donors can’t kill or water it down—seems to be the only way to shake these money men’s pockets and make some of the coins fall. When I talk to Mayor Mahan about it, he unfortunately agrees. “This should be a massive wake-up call to our leaders in Washington in particular that they need to take bolder action to make our tax code fairer and make our systems more efficient,” he says.
One might expect smart billionaires to push for these bold actions, to defend against more onerous wealth taxes. Instead, in interviews and social media posts, rich people throw tantrums. A particularly alarmist response came from the four self-proclaimed “best friends” of the popular people. While podcast. As far as I know, only one is a real California billionaire: venture capitalist Chamath Palihapitiya. But all are loaded with the spoils of tech investments, including VC David Sacks, who is also Donald Trump’s AI and crypto czar. In a recent episode, David Friedberg, who sold its climate-friendly company to Monsanto for $1.1 billion, took the lead in the protest against the wealth tax. He warned that the billionaires tax is a Trojan horse for a government surveillance state where each citizens’ personal property will be subject to a tax, even the jewelry your grandmother gave you! “The reason they’re talking about the billionaire tax is to make it easier for people to vote and opt into this whole new tax system that they’re proposing to impose on all Americans,” he said. (It’s hard to imagine a lawmaker suggesting that. In any case, no such proposal exists.) Sacks agreed. “It’s an expropriation, it’s a seizure of assets!” » he cursed.
Guys, every tax is a “socket.“Best Friends doesn’t object to payroll taxes, where the government takes a large portion of people’s wages, or property taxes, where the government assesses the value of a house and takes a percentage. But when it comes to taking a cut of vast stocks and the value of superyachts, these plutocrats sound like Branch Davidians. (To be fair, Friedberg has mentioned what he considers more reasonable alternatives to a tax on wealth, such as raising the capital gains tax rate or imposing taxes when people borrow against their stock holdings. But he made it clear that he opposed these measures.)
If the billionaire wealth tax passes, it will owe much of its success to the hubris of billionaires. Super-rich tech figures constantly present themselves as wealth creators, but that wealth was made possible by revolutionary tax-funded technologies that made their companies possible in the first place. Of course, many of these founders were smart and worked hard to build their companies. But without government research, which led, among other things, to microprocessors and the Internet, many of these billionaires might now be working in offices, operating the cranks of mechanical calculating machines.
Instead of sneaking out of the state that made them rich, fat cats should take a lesson from Nvidia co-founder Jensen Huang, whose net worth is around $155 billion. At CES this week, an interviewer asked his opinion on wealth tax. “I haven’t thought about it once,” said Huang, who would have to pay about $8 billion if the ballot initiative passed. But he understood that even that crazy sum is a relative speed bump compared to the gains that would come from staying in the area. “We work in Silicon Valley because that’s where the talent pool is,” he said. When the interviewer told him that a lot of people were “thinking” about the wealth tax, Jensen redoubled his efforts. “Not this person,” he said. “This person is trying to build the future.” What a contrast to these billionaires who are trying to hang on to every dollar while starving the government that helped them build their fortune.
It is about a ne edition of That of Steven Lévy Backchannel Newsletter. Read previous newsletters here.