> 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.
A millionaire's tax is the flip side of "privatize profits, socialize risks."
Privatize risk, socialize reward.
Let's not leave out bankruptcy protection, emergency lending, industry bailouts, disaster assistance, government procurement. Oh, and the Federal Reserve standing behind financial markets to prevent the entire credit system from falling to crap.
I'm pretty sure every entrepreneur took advantage of nearly all of these publicly paid for infrastructure to get where they are, today. There would be no spoils for Brin if not for all these things. Things that taxes provide.
Second, all of them.
And the idea would be to tax high net worth (HNW) individuals. Not on their salary, because part of the game is that capital is taxed less than labor, and stocks aren’t taxed until you realize a gain. So what do ultra rich folks do? They take loans against their stocks (same stocks that public sector unions use to fund their retirement pensions), and can realize just enough to pay off the loan (or roll over the loan) and they get far better interest rates on their loans than you or I do.
So we either tax them against the loans they take out against their stock, or we tax their unrealized gains at their face value, or tax those loans as income against HNW individuals.
There are several ways to ensure folks that have made billions are taxed, but right now we aren’t willing to make those policy choices to tax them — and we even give their circumstances preferential treatment, even though we’re willing to make no concessions for folks that make $30,000 a year and are fighting for their next meal.
Tax all of them. No one has ever earned a billion dollars.