California’s audacious plan to tax its billionaires

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If there is one thing Democratic politicians can agree on right now it’s this: Rich people should pay more in taxes.

New York Mayor Zohran Mamdani has made it a centerpiece of his agenda. Texas Senate candidate James Talarico is bringing it up on the stump. And Georgia Sen. Jon Ossoff’s riff on the “Epstein class” of rich guys staffing the Trump administration is one of his signature applause lines.

This November, voters in the Golden State will decide whether to levy a first-of-its-kind, one-time tax on the roughly 250 billionaires who live in the state, equal to 5 percent of their total assets. Many of the state’s billionaires are furious — and a few have already moved away.

The tax is supported by labor unions and some populist lawmakers like Sen. Bernie Sanders (I-VT) and Rep. Ro Khanna (D-CA), but it’s less popular with moderate Democrats.

Some experts, like Cornell University sociology professor Cristobal Young, are leery too.

“It’s a one-time tax, but this is not a one-time problem,” Young, who also wrote the 2017 book The Myth of Millionaire Tax Flight: How Place Still Matters for the Rich, told Today, Explained co-host Sean Rameswaram. “So why are we talking about a one-time sort of Band-Aid over this?”

Sean spoke with Young about what Young’s research shows about whether the wealthy move away from higher taxes, why this tax proposal may be different, and the right way to tax the very rich.

Below is an excerpt of their conversation, edited for length and clarity. There’s much more in the full episode, so listen to Today, Explained wherever you get your podcasts, including Apple Podcasts, Pandora, and Spotify.

Yeah, certainly. There’s a fundamental loophole in the tax system. Every paycheck, I’m paying taxes straight out of that, and so are all your listeners. But if you make your money from holding corporate stock that’s appreciating in value dramatically over time, you don’t pay any tax on that until you sell it. That leads to a situation where people are accumulating vast fortunes essentially without paying any tax on it at all. It’s a huge inequality in the tax system and it’s especially apparent at the very top. I think it’s just a question of what we are going to do about it.

I’ve been studying the policies currently in place. There are states today that have taxes on millionaire incomes and we have a really good sense of the impacts of that. They raise a lot of revenue, and they don’t have very much effect on migration. Maybe a few people move, but generally not. My research contribution to this is tracking where millionaires live before and after these tax increases. I found between no to very little tax migration in response.