> On the other hand, billionaires were already paying so little in California income tax that their departure may not pack as much of a punch as anticipated. A working paper published by the National Bureau of Economic Research in May noted that billionaires residing in the state paid $4.1 billion in income tax last year, about 0.2% of their collective $2 trillion net worth, meaning that even if every billionaire were to leave the state, it would take about 25 years for lost income tax revenue to cancel out the $100 billion sum California is projected to get from the tax. Even if a billionaire mass exodus included one-quarter of the state’s wealthiest residents, it would take a century to equal the $100 billion windfall.
Questions:
- What knock-on benefits might there be from California "losing" the billionaires who departed? I'm guessing they're already rather scarce on most people's Civic Virtue leaderboards. And would stay that way in their new states. Without them, would behavioral norms in the ultra-rich social set move (at least somewhat) toward "nice"?
- How much of the (wild guess) $500M that the angry billionaires will end up spending to fight the proposed billionaire tax will stay in California?
- Is this whole situation a win-win for "the 99.9%" citizens of California?
Furthermore, even if paying a wealth tax forces stock liquidations that cause stock prices to plummet, unrealized gains do not flow into the real economy anyway. The key is the velocity of money, and from that perspective, unrealized gains are dead capital. Even at the cost of a stock market decline, if capital is forcibly circulated and pumped into wage increases or public infrastructure, the actual income rate and purchasing power of the general public with a high marginal propensity to consume will rise.
Then, thinking about why ultra high net worth individuals refuse to pay taxes, I believe they are idealizing themselves as the heroes of humanity. This means they think it is more ideal to strive for human immortality than to invest in 'inefficient' things like infrastructure through taxes. In other words, they believe they are investing more 'efficiently'. However, such thinking is neither rational nor logical at all. The reason is simple.
The idea that their class can be maintained when the base system collapses is dangerously complacent. From a programming perspective, if the OS crashes, how could the application layer possibly survive?
Points, but I'll argue that: (1) Such plummeting would prove that the stock valuations were already very near the peak of a bubble, if not fraudulent. And (2) billionaires making that argument is a perhaps-legal but horribly immoral sort of Stockholm Syndrome move - telling a large number of equity investors "either I get my way, or things will get real painful for you".
> ... thinking about why ultra high net worth individuals refuse to pay taxes ...
I'll argue that most of the ultra-rich got that way through some combination of pathological obsessions with wealth and power. And their social environment skews very heavily toward (1) peers/rivals/friends/family with such obsessions, and (2) underlings/petitioners/fans/admirers with (at best) very unhealthy fixations on wealth and power.
> The idea that their class can be maintained when the base ...
Yep. https://en.wikipedia.org/wiki/French_revolution#Causes
My read of history that many in the ruling classes of other European countries really learned that squeezing their own lower classes too hard could end horribly for them. But human memory, even institutional, fades with time. And "this time is somehow different" is a perennial and seductive belief.