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California's Wealth Tax Vote: A Chance To Register Public Opinion Of Billionaires

California's Wealth Tax Vote: A Chance To Register Public Opinion Of Billionaires

A coalition of progressive groups, led by the huge union SEIU-UHW, managed to get a one-time five percent wealth tax on the ballot this fall. The tax would apply to the assets over $1 billion held by the state’s 200 or so billionaires. This is a great opportunity for the people of California to tell billionaires what they think of them.

Over the last half-century, billionaires have become increasingly aggressive in stealing from the rest of us, as well as being more open in expressing their contempt for ordinary people who work for a living. It’s not uncommon to see billionaires like Peter Thiel and Elon Musk opining on issues like the need to deny the vote to inferior people, as in non-billionaires. And Elon Musk is, of course, best known for his boosterism of neo-Nazi political parties around the world.

In addition to pushing their hateful views on politics and society, the billionaire gang has also been using their wealth to increasingly dominate politics. Musk was the most open on this topic, spending almost $300 million to keep Donald Trump out of jail put Donald Trump in the White House. He promises to again be a big spender for Republicans in the midterms, as do many others in the billionaire club.

The billionaire crew has also been aggressively buying up media outlets and turning them into MAGA megaphones. Loyal Trump ally and Oracle founder Larry Ellison bought up Paramount and CBS and is now trying to buy Warner Brothers and CNN. He also was handed control of TikTok after Trump wrestled it away from a Chinese company. Newly registered Trump sycophants Mark Zuckerberg and Jeff Bezos own Facebook and the Washington Post, respectively. And Elon Musk bought Twitter, now “X,” to push his far-right politics.

And they use this power to give themselves big tax breaks and also government handouts. The latter take the form of government contracts as well as regulatory provisions to protect their companies.

The wealth tax is an opportunity to fight back against the billionaires. According to the proponents, the tax will raise over $100 billion over the next five years. (The billionaires have five years to pay the tax, but it is based on their assets as of December 31, 2025.) That calculation even allows for substantial avoidance.

This is real money even in the context of California’s budget. Its annual budget is currently a bit over $350 billion. If the state collects $100 billion over five years, it will be a bit less than six percent of projected spending. That will make a noticeable difference to the state budget, especially in a context where the federal government is making major cutbacks in state assistance in healthcare and other areas.

The referendum provides people with a clean vote on what they think of billionaires. The politicians who represent their interests are experts in providing smoke screens. They constantly warn people that if they vote against the billionaires’ candidates, their boys will be turned into girls in school at recess. Or that the immigrants who are mowing lawns or selling tacos from food trucks are actually rapists and murderers. But the referendum on the billionaire wealth tax allows even people who have these concerns to vote to reduce the wealth and power of the billionaires.

To my mind, this sort of wealth tax is not the perfect remedy for inequality. I was concerned that the tax would lead to an exodus of billionaires from the state. While California might be better off with fewer Elon Musk-types dominating public debate, it does collect substantial income tax revenue from the very rich. If too many billionaires fled the state to avoid the tax, it could end up a net revenue loser over the long run.

But the date for flight has already passed, so the state might as well impose its billionaire tax on the vast majority who have stayed in the state. There is also the issue of the tax’s constitutionality. I have seen what seem like solid arguments from legal scholars that the tax does pass muster, but I don’t know anyone who will take a bet on how the MAGA Supreme Court will rule. In any case, it would be foolish to surrender prematurely.

In most of my writing, I have argued that it is best to structure the market differently so that we don’t end up with a small number of ridiculously rich people. Reducing the importance of government-granted patent and copyright monopolies is the most obvious way. That would prevent the fortunes of billionaires like Larry Ellison and Bill Gates, but there is a much longer list of reforms to finance and other sectors that would lead to a market that creates far less inequality.

Perhaps after the collapse of the AI bubble, we will be able to have a serious discussion of ways to structure the market that are both more efficient and lead to less inequality. But for now, we can focus on taking back some of the money we handed to the rich, and the California billionire’s wealth tax is a good place to start.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

How Do We Make Billionaires Pay Their Fair Share Of Taxes? Beef Up The IRS

How Do We Make Billionaires Pay Their Fair Share Of Taxes? Beef Up The IRS

"The rich should pay their fair share of taxes." Who can argue with that? But then we must decide who is rich and what is meant by fair. Neither political party has distinguished itself in making such distinctions.

But Republicans play an especially outrageous game in portraying the Internal Revenue Service as the working stiff's enemy. For salaried workers, taxes come straight out of paychecks, meaning most are already paying what they owe. Owners of small businesses have more deductions at their disposal, but the neighborhood bakery that tries to follow the rules doesn't have much to fear.

When Joe Biden's Inflation Reduction Act funded the hiring of about 15,000 IRS employees, however, Republicans played the public for boobs. "Are they (the IRS) going to have a strike force that goes in with AK-15s already loaded, ready to shoot some small-business person in Iowa?" Sen. Chuck Grassley, the Iowa Republican, asked on Fox News.

In reality, criminal investigation special agents go only after serious tax cheats, and just 2,000 of them are armed. These cases involve destroying records, double-bookkeeping and the like. They aren't persecuting taxpayers whose math was innocently off or were even negligent.

And so to address Grassley's complaint: If some small business person in Iowa is engaged in money laundering, narcotics trafficking or major league fraud, then yes, armed IRS agents may come to visit.

The IRS employed about 102,000 people at the beginning of Donald Trump's second term. Staffing has been cut down to about 74,000. Not only are there fewer agents going after tax dodgers, but there are also fewer customer support workers able to answer ordinary people's tax questions.

The chief beneficiaries of lax tax enforcement are the rich who employ squads of accountants to hide income or manufacture unlawful deductions. The tax code already favors them. For example, capital-gains taxes — which are paid after selling stock or other assets — can pay taxes at a lower rate than wages. That's why Meta magnate Mark Zuckerberg has himself paid a salary of only a dollar a year. He is lavishly compensated through a cargo-ship-sized pile of securities and other assets taxed at the lower capital-gains rate.

There are reasons for treating capital gains differently from earned income, but must the tax advantage for the former be so big?

Democrats crusading for more tax "fairness" have this foolish habit of targeting their own rich residents. The proposal in Democratic-controlled California to slap a one-time five percent tax on everything a billionaire owns is nuts. Democratic Gov. Gavin Newsom wisely opposes this utterly complicated scheme, which it seems would force some Californians to add up the value of their vintage watches, boats and paintings for tax purposes. New York City Mayor Zohran Mamdani, meanwhile, weaves myriad proposals for raising taxes in ways that would seep deep into the middle class.

What the California and New York tax proposals have in common is providing an incentive for the rich to move elsewhere. It's not like these places don't already tax the top incomes. Many very rich people have continued to live in these jurisdictions for their economic vitality, schools, cultural institutions and other amenities. And they pay almost all the income taxes.

But they have limits. It's one thing to tax them. It's another to portray taxing them as a means of punishment. Tax reform that closes loopholes and special deals benefiting the super-rich much be done at the national level.

The IRS doesn't make tax laws. It is federal agency that collects taxes and enforces the laws. Middle-income and "merely affluent" Americans should recognize this: The taxes that the richest among us don't pay are taxes that they pay.

Froma Harrop is an award winning journalist who covers politics, economics and culture. She has worked on the Reuters business desk, edited economics reports for The New York Times News Service and served on the Providence Journal editorial board.

Reprinted with permission from Creators.

If Trump Cancels Midterms, The Tech Billionaires Wouldn't Even Blink

If Trump Cancels Midterms, The Tech Billionaires Wouldn't Even Blink

The lack of market reaction to the news that Trump ordered his Justice Department to investigate criminal charges against Fed Chair Jerome Powell surprises many people. After all, everyone knows that the claims about cost overruns being the basis for the investigation is nonsense. Trump wants to threaten Powell with criminal charges because he ignored Trump’s demand that he lower interest rates.

This ordinarily would be seen as a very big deal. Ever since Nixon, presidents have been reluctant to be seen as pressuring the Fed. In fact, their concern on this issue often seemed absurd to my view. President Biden didn’t want his Council of Economic Advisors to even comment on interest rate policy, as though giving a view based on the economic data would be undue pressure.

There is a big difference between presenting an economic argument and threatening to imprison a Fed chair who disagrees. And we now see which side Trump comes down on.

But apparently, the markets are just fine with this new threat. The major stock indexes all rose on Monday, although bond prices fell slightly, pushing long-term rates higher. The dollar also fell modestly.

The non-reaction of the stock markets might seem surprising. After all, the independent Fed is considered a sacred feature of U.S. prosperity. There is no shortage of economists who will insist that a Fed that is subordinate to the whims of a president is a quick route to double-digit or even triple-digit inflation. (I’m more agnostic on this one, but the markets generally don’t listen to me.)

Anyhow, Trump is now not just looking to fire an insubordinate Fed chair, he’s looking to throw him in prison. And the markets just yawned.

This reaction should cause us to start asking how the markets might react if Trump just cancels or outright steals the 2026 elections in order to keep his lackeys in control of Congress. Under any other modern president, the fear of a cancelled or stolen election would be silly. While they might have used dubious tactics leading up to an election, we could be comfortable that the votes would be counted, and the outcome would be binding. (Florida in 2000 is a major exception.) No one ever suggested that an election would be cancelled.

But Trump has made it clear that he considers both cancellation and ordering that some votes not be counted as serious options in his recent New York Times interview. No one can be safe in assuming that we will have a normal democratic election this year.

Given this reality, we might want to speculate on how the markets would react in the event that Trump does decide to end American democracy. We now know that most of the big money boys couldn’t care less about democracy. Jeff Bezos, Mark Zuckerberg, and Tim Cook have been happy to cozy up to Trump in Mar-a-Lago, even as he violates one democratic norm after another. Elon Musk has made it clear that he has contempt for democracy, insofar as it means allowing non-white people to vote.

This gang would obviously have no moral issues with a cancelled or stolen election. But what about the economics?

Trump has already made it clear that he will favor businesses whose leaders praise him and punish those who criticize him. His most recent effort in this direction was saying that he intended to ban Exxon-Mobil from access to Venezuelan oil because its CEO said what every oil analyst has said since Trump became president of that country: it will be difficult for companies to profitably invest there.

The economies of countries where the leader can reward or punish companies on a whim tend to not do very well. The courts have provided a limited check on Trump’s whims as has even this pathetic Congress. However, if Trump is deciding who serves in Congress, the checks will be gone. We will have full rule by our demented 79-year-old president.

Perhaps markets will be fine with that. With enough rear-end licking some companies may still do fine, but it would seem on the straight economics most people with money would probably prefer to invest in a serious country. Let’s hope we don’t have to find out.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.

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