SACHA PFEIFFER, HOST:
It's been one week since the polls closed, and The Associated Press has called the result on another vote - the California billionaire tax, Proposition 40. It failed. The state ballot initiative would have been a one-time tax on anyone with more than $1 billion to their name. Greg Rosalsky is a reporter for NPR's Planet Money who's been following this Hi, Greg.
GREG ROSALSKY, BYLINE: Hey, Sacha.
PFEIFFER: How big would this tax have been?
ROSALSKY: So, Prop 40 would have imposed a one-time 5% tax on the net worth of billionaires who lived in California as of January 1, 2026.
PFEIFFER: And it was a pretty sweeping tax in terms of applying to almost all their assets, is that right?
ROSALSKY: That's right. That's basically how wealth tax works. It's sort of like a property tax, which is, you know, applied to real estate, but it applies to basically everything - paintings, you know, jet skis, Lamborghinis, helicopters. Whatever billionaires own would be levied, although Prop 40 did have some exemptions for real estate pensions and retirement accounts.
PFEIFFER: Tax the rich has become such an anthem for so many people in our country. What does it tell us that the first time we tried to do what would have been the country's first-ever wealth tax targeted at billionaires, it failed?
ROSALSKY: Well, you know, that is part of a big political dispute right now. Some are saying, you know, this narrowly failed, and that's despite all this money that was spent by billionaires, and they blanketed the airwaves. And others are saying, well, look, like, this is a bad policy. Voters don't like it, you know, especially more moderate voters. California is a deep blue state and couldn't even pass there. But, you know, there were also specific issues with this specific wealth tax that might be different if there were another wealth tax proposed, say, at the national level or another state.
PFEIFFER: Break that down for us a little bit because I know you talked to two different economists who had different views on this tax. Give us the view of the economist who thought it was a tax that was worth passing.
ROSALSKY: Right. So I talked to this guy. His name's Gabriel Zucman. He splits his time at UC Berkeley and the Paris School of Economics, and he's actually one of the leading champions of wealth taxes. His basic argument is that billionaires barely contribute anything in income taxes. They can basically structure their wealth, so they don't have to pay income taxes. Most of billionaire wealth is actually, like, in their companies and equities, and they have to liquidate those equities - they have to sell them - in order to for it to get taxed. So they can defer taxation. And this would be a way to combat runaway inequality and the political power of billionaires and also raise some money for the rest of Americans.
PFEIFFER: And the economist who thought the tax wasn't a good idea, why did that economist think that?
ROSALSKY: So I talked to Joshua Rauh at Stanford University. He's also a senior fellow at the Hoover Institution. He argued that this wealth tax would basically damage the California economy. You know, there's a thriving tech ecosystem in the state, and he was worried that this would leave a lot of billionaires to leave and take their businesses with them and also the existing tax revenue that they already contribute to the state, the income taxes they currently pay.
PFEIFFER: Meaning you'll tax the billionaire now, but you might lose out on taxing the income of that billionaire in the future - is that the idea?
ROSALSKY: Exactly. Exactly.
PFEIFFER: Greg, what is likely to happen next? Would California potentially create a new draft of a tax that's written differently? Could we see a different state try to do this? Could we see it happen on the federal level? What do you predict?
ROSALSKY: This will probably get proposed in Congress and probably not go anywhere, but I do think it could become dividing point in the Democratic presidential primary. There will be certainly a lot of discussion about the billionaire class and the best way to tax them. And I think there will be vigorous debate on whether levying a tax on their wealth as opposed to, you know, traditional income taxes will be the way to go.
PFEIFFER: That is Greg Rosalsky. He's a reporter for NPR's Planet Money. Thanks, Greg.
ROSALSKY: Thank you so much.
PFEIFFER: For more analysis from Planet Money, sign up for its newsletter. Go to the Planet Money website on npr.org and click the blue button that says - subscribe to Planet Money newsletter.
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