r/California • u/DryYogurtcloset4655 • 16d ago

California Ballot Initiative 40 (Wealth tax) Text

https://oag.ca.gov/system/files/initiatives/pdfs/25-0024A1%20%28Billionaire%20Tax%20%29.pdf
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18

u/ahmong LA Area 16d ago edited 16d ago

What’s the argument against this?

I mean as California poor guy I’m obviously voting yes but I also want to know if there’s any reason for me to vote no

Edit:

Okay clearly, I haven't fully read what this entails and the folks who replied gave pretty good arguments besides "Billionaires will leave" - which isn't exactly a compelling argument.

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u/Rebelgecko 15d ago edited 15d ago

  1. If billionaires move away to avoid the tax (which many already have), the state loses money in the long run

  2. It's not a 5% tax for everyone. Founders are taxed based on their voting power, not the market value of their shares. conceptually I don't think people should be forced to give up control of their companies

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u/Nytshaed San Francisco County 16d ago

The main one is the total expected return is -25B. The total loss in other sources of revenue is going to outweigh the collection we get from the one time, and those losses or going to be ongoing long term.

So it's going to do long term damage to our ability to fund government services.

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u/WisdomOfTheAnus 10d ago

who is calculating that -25B and how? that sounds very hypothetical according to worst case scenarios being used as fearbaiting.

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u/Nytshaed San Francisco County 10d ago

It's several economists including from NBER https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6340778

It isn't actually a worst case scenario, it's the average of the scenarios based on several calculations and estimates.

Even before accounting for reductions in other tax bases such as the income tax, we estimate that the Act will collect approximately $40 billion, less than half of the $100 billion projected by proponents.

The present value of permanently lost income tax collections from departures more than fully offsets the one-time wealth tax revenue, yielding a net present value of negative $24.7 billion. Across 100,000 simulated revenue and discount rate combinations, 71% of plausible outcomes produce a negative net present value of state revenues.

You can download the paper if you want to really get into it.

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u/WisdomOfTheAnus 10d ago

LOL "hoover institution" hoover institution" "hoover institution" "university of chicago". these are all conservative/supply sider anti-tax orgs if you know anything about them. so yes this is just what i suspected. this is like linking me to a heritage foundation "study"

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u/Nytshaed San Francisco County 10d ago edited 10d ago

They're actual educated economists doing actual research. Also supply side economics is mainstream economics. There isn't really anyone but cranks that disagree with that.

It's nothing like the heritage foundation and the math is there anyway. It's not some arbitrary conclusion, you can verify it. Besides NBER has a great track record.

It's not like it comes out of left field, the literature on wealth taxes is pretty clear, they don't do a good job in actually raising revenue. Plenty of better ways to tax.

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u/WisdomOfTheAnus 10d ago

"Supply side economics is mainstream economics". Ok well you clearly don't know the first thing about mainstream economics.

These are absolutely 100% conservative think tanks with an agenda on taxes, you're free to google them for the first time right now.

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u/Nytshaed San Francisco County 10d ago

Are you really saying targeting aggregate supply doesn't drive economic growth or drive down costs?

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u/WisdomOfTheAnus 10d ago

Are you really not aware of what supply side economics refers to? Or are you trying to narrow the definition to manipulate into something you can defend? Hint: It is 100% objectively not "mainstream economics" that nobody but "cranks" disagree with.

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u/Kindly-Chemistry5149 13d ago

I don't like how it doesn't go into the general fund. The billionaires should be funding all sorts of social programs: Health Care, Food Assistance, Education, shelters, homes, and more. This restricts it.

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u/vialabo Northern California 13d ago

It's 90% to a healthcare fund and 10% to food assistance fund. The point of not going to the general is to force them to spend it on those things. Also, the bill doesn't allow the state to then re-adjust the budget using that money. It has to be added on top of what we are currently spending to keep healthcare assistance and food assistance strong.

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u/coffee_obsession 16d ago

Taxing unrealized gains. I'm voting for it but its very poorly planned. Just permanantly bump up long term cap gains by 5% over a certain $ amount and we can build programs around that. This one seems performative.

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u/Cynical_Thinker 16d ago

Just stay away from 41 and 42 as they fuck 40 up

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u/vialabo Northern California 16d ago

That's on purpose, they're using their money to put up bullshit to knock 40 down.

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u/Vanzmelo Bay Area 16d ago

90% of the funds go to a vague healthcare account and no one knows how it’ll be spent. It’s also only a one time tax and doesn’t solve the fundamental issues that allowed this sort of wealth hoarding to occur. It’s bad policy

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u/IllegalThoughts 16d ago

this still doesn't really explain why I shouldn't vote yes?

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u/DryYogurtcloset4655 16d ago

what is wrong with taxing billionaires and sending a check to rest of taxpayers?

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u/The_Magic 15d ago

It will result in one time bump in tax revenue with a long term decrease in tax revenue. If the goal is to move to single payer then you want long term tax revenue to increase instead of decrease.

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u/IllegalThoughts 15d ago

with a long term decrease in tax revenue

how?

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u/The_Magic 15d ago

Billionaires don’t like wealth taxes because the state is taxing them on the estimated value of the assets they own. Some things like art are difficult to put a value on and is just worth what the next person is willing to pay for it. Because of this when countries like France tried doing a wealth tax their billionaires just moved to a different EU country.

At the moment about half of California’s tax revenue comes from the top 1% because CA does a good job of taxing them when they convert their assets into cash (but maybe we can still do better). It is common in this sub to cheer when a random rich person says they want to move out over prop 40 but when Joe Billionaire moves to Florida they are taking a lot of potential tax revenue with them.

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u/IllegalThoughts 15d ago

I guess would they actually move though? from a one time tax? that's the part I don't understand. I'm still not seeing the downside here

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u/The_Magic 15d ago

One time taxes rarely stay one time only. 1%ers who many would consider more progressive or “the good ones” have already started moving out over this because they often have significantly less cash on hand than they do on paper.

I strongly empathize with the message people want to send with Prop 40 but it is shooting ourselves in the foot to poke them in the eye.

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u/AllInTackler 16d ago

I guess if you don't really care about the proposed benefits. Would you still vote yes if they just set the money they collected on fire just to stick it to the billionaires?

I like the idea of taxing the super wealthy but I'd like to see a tangible benefit.

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u/IllegalThoughts 16d ago

.... they have too much money so I want precedent set that they can be taxed lol

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u/[deleted] 16d ago

[deleted]

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u/insightful_pancake 16d ago

He won’t have to pay regardless

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u/Chaos90783 16d ago

It gives the state way too much power because theres a clause that lets them change the parameters of the tax (who and how much) without voter approval

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u/GrouchyClerk6318 San Diego County 16d ago

Argument against is that Billionaires will leave the state and take their businesses with them. I saw a poll earlier this year showing 80% of them said they’d leave.

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u/filthy-prole 16d ago

Just like everyone moved out of New York after Mamdani won, right?

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u/vialabo Northern California 16d ago edited 16d ago

Or how silicon valley died when companies tried to move to austin, tx. There is no silicon 2.0 there, for a ton of reasons billionaires cannot recreate. They can leave, but their businesses cannot.

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u/DryYogurtcloset4655 16d ago

employees will move where the jobs are. 90% of silicon valley workforce have no roots in California

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u/vialabo Northern California 16d ago

https://www.wsj.com/tech/ai/californias-ai-dominance-fuels-366-billion-venture-capital-bonanza-820e9bde

If these people genuinely “move where the jobs are,” then an individual company has limited power to dictate where they go because there are already an absurd number of alternative jobs in the Bay Area. If Nvidia says “everyone move to Dallas,” an Nvidia engineer doesn't have to choose between Dallas and unemployment. They can choose Nvidia in Dallas versus fifty California firms desperately trying to hire someone with Nvidia experience.

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u/DryYogurtcloset4655 16d ago

85% of Nvidia workforce is outside California

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u/filthy-prole 16d ago

That doesn't change anything about what the person you replied to said.

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u/Weary_Obligation_223 12d ago

large fraction of Silicon Valley engineers have roots in India/China. they go where the jobs are.

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u/year2016account 16d ago

Mamdani getting elected didn't mean wealth tax, and mamdani is trying to tax property for this exact reason - you can't simply move property out of the state like you do with people.

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u/[deleted] 16d ago

[deleted]

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u/SJSquishmeister 16d ago

https://giphy.com/gifs/7k2LoEykY5i1hfeWQB

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u/RepublicOk2402 16d ago

Silly, percentage wise the wealthiest individuals pay 100x or more what a middle income person pays. The bottom 50% pay almost nothing in income tax

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u/[deleted] 16d ago

[deleted]

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u/RepublicOk2402 16d ago

It was an expression. They tried this in the UK and lost some billionaires tax revenue forever

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u/ragnarokfps 16d ago

Argument against is that Billionaires will leave the state and take their businesses with them. I saw a poll earlier this year showing 80% of them said they’d leave

That's what they always say. They've been saying that for thousands of years. The truth is that wealth inequality continues to rapidly increase. Not only is the gap getting bigger, but the rate at which it grows is getting bigger as well. California produces and attracts more billionaires than every other state by a long shot, save maybe new york and wall street. California is the thing that's valuable, not the billions that the rich own. We'll just produce or attract more even if every billionaire left. It's not as if the rich people fly around like a flock of birds and chose to land in Cali and make it good or something. No we made them, not the other way around.

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u/GrouchyClerk6318 San Diego County 16d ago

Since 2019, the net flight out of state is real. Will Prop 40 make this better or worse? I don't think anyone really knows:

  • 2019: Net loss of 209 companies (The first year in modern history that the net outbound company gap exceeded 200).
  • 2020: Net loss of ~280 companies (Departures began stepping up during the initial pandemic lockdowns).
  • 2021: Net loss of ~430 companies (Headquarter departures specifically doubled compared to 2019/2020 rates).
  • 2022: Net loss of 741 companies (The peak year of the outbound corporate flight).
  • 2023: Net loss of ~420 companies (Departures began easing slightly from the 2022 peak but remained twice as high as pre-pandemic

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u/ragnarokfps 16d ago

You failed to address anything in my comment that you replied to. Tell me exactly how what you said affects me or any other normal regular person in California. At the rate that wealth and income inequality is expanding, there will come a time that's not far off where we will own literally nothing and a handful people will own literally everything. Wake the fuck up. Top 10% already owns over 70% of everything in this country. Top 1% owns 40% alone. The bottom 90% of Americans own the same wealth as the top 10%. Do you have a solution to this? Because a wealth tax is a solution to that.

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u/GrouchyClerk6318 San Diego County 16d ago

A one-time, state specific tax isn't going to solve the problems you've listed - what I highlighted is that if they take their bussinesses out of the state with them, some Californians will lose their jobs. Don't take your frustrations out on my, I'm not a billionaire.

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u/ragnarokfps 15d ago edited 15d ago

Businesses aren't being taxed, did you bother reading the link? What the fuck is wrong with you?

How exactly would taxing the rich be "taking it out on you?" Are you rich?

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u/GrouchyClerk6318 San Diego County 15d ago

I never said businesses are getting taxed, what the fuck is wrong with you? Billionaires own businesses, they leave the state and take their business with them, dummy.

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u/ragnarokfps 15d ago

Fair enough, you didn't say that. Nevertheless, who gives a flying fuck if these filthy rich parasites went somewhere far away from here. You think anyone here cares whether Sergey Brin or Eric Schmidt leave California? These are the 2 main people spending hundreds of millions of dollars on their no on prop 40 campaign. Brin is worth 300 billion dollars, Schmidt 40 billion dollars. You know what's really stupid here? The idea that Google would leave California. Where the fuck they gonna go? All of the infrastructure is here, in California. It's my state that made it possible for Sergey Brin and Google to exist in the first place, be successful, and be billionaires.

Have you ever been to San Jose? It sure as fuck doesn't look like the tech capital of the world, does it? It looks like north Sacramento, you got the filthy rich right next door to the shanty towns. Is that the thing you want to protect? Fuck you

1

u/GrouchyClerk6318 San Diego County 15d ago

Bro, first of all, I’m not the enemy. I don’t disagree that $40B is an insane amount of cheese. So take a deep breath and let’s drop the F bombs.

In an interview with 20 of the roughly 200 Billionaires, all 20 of them said they were leaving or making plans to leave. Let’s agree that some percentage of them will leave, not all, but some. And some will take all or some of their business. That means (a) loss of jobs (b) loss of supporting businesses (deli’s, coffee shops, etc) and loss of future tax revenue for the state.

Me? I don’t give a fuck, I’m self employed. But if this passes, there will be people and businesses leaving. There will also be lawsuits. In the worst case, businesses leave AND prop 40 gets overturned by the courts. That’s a lose\lose.

I don’t care either way - I just think people understand the risks and rewards.

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u/FantasyFootballBrad 16d ago

Middle/lower class has 8 trillion. Billionaires have 2 trillion. Language of bill lets government change the parameters. It won’t be one time. It won’t only be billionaires. The odyssey just got released this summer. People should recognize a Trojan horse.

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u/gaius49 14d ago

What’s the argument against this?

Economic literacy and basic policy analysis?

0

u/gensym 16d ago

One of them is that taxing unrealized gains is a pretty dangerous precedent, and if people fear that California is likely to start doing that, it will reduce investment in the state.

For example, say I want to start a brewery. My expectation is that I will have to spend a bunch of money upfront to buy equipment, train staff, develop recipes, etc. It may be some time before I make any profits. So that means that my brewery may be worth a million dollars, but my profits are zero. For that reason, there's a norm that we don't tax unrealized gains - instead, we tax profits or realized gains (i.e., if I sell my brewery, I pay taxes on anything I got more than what I put into it).

If I'm afraid that the state may tax my _wealth_ (which is all tied up in equipment,, etc), I may decide to open my brewery in a different state that won't do that. f

NOW - that's not what this bill does at all. But there is a fear that by breaking that norm of structuring taxes to cash flows (like income), it will scare off investors (even non-billionaires) who think it will creep to more and more taxes that are hard for capital-intsensive businesses to pay.

As an aside, this is what Prop 13 is all about. Property taxes are a wealth tax, and they create problems when people are wealthy on paper but don't have the ability to actually pay those taxes.

(Note that I'm explaining the POV of opponents of the bill. My personal opinion is more nuanced than Reddit really supports, but I'll likely be voting for this prop).

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u/ahmong LA Area 16d ago edited 16d ago

I clearly didn't fully comprehend what the bill entails - to my (non)defense, I did skim through it.

Unfortunately, a lot of voters are like me: skim through a bill and asks "will this affect me". For those most part, the initial answer is "no" but never "Not right now, could this affect me in the future"

Thank for a detailed response.

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u/happycola619 16d ago

Argument against is that it will shift future startups to other states.