How Not to Soak the Rich

There’s an article in Reason about California’s proposed tax on the wealth of billionaires, which would tax assets, not current income. The whole article is worth reading, but something which particularly struck me was the statement that covered assets “exclude real property and some pensions and retirement accounts.” Almost fifty years ago, California voters enacted Proposition Thirteen, which cut the property tax, and in particular slowed the rise of assessments on property which remained held by the same owner; the assessed value could still rise when a new owner bought the house and ground.

And now this. Suppose that billionaire Brendan is a descendant of a nineteenth century robber baron who acquired vast landholdings in California by means best not examined too closely; Brendan still owns land worth a fortune, and collects the rents. His landed estates would not be hit by the billionaire tax.

Billionaire Bernard started with much lesser advantages, but had a good idea, helped start a firm in Silicon Valley, worked hard, and is now quite rich, owning a major share of a productive business. His shares would be taxed, and if he controls part of the company by owning preferred stock, his preferred shares would be taxed at more than their actual market price. Productive Bernard would be mulcted, and may even now be moving to another state to avoid the threatened tax.

If California were to learn from the Prophet of San Francisco, it would instead tax land values; Brendan would not be able to respond to such a tax by carrying his acreage to Texas or Florida or Idaho.

And now, I hope to get back to sleep.