A Wealth Tax Is Not How You Soak the Rich
It thrills me to read that Peter Thiel and Larry Page may flee California if the state implements a one-time 5 percent wealth tax on billionaires. On fairness grounds, Thiel and Page have no case. If anything, the 2026 California Billionaire Tax Act is too easy on Golden State oligarchs, because 5 percent is a pretty small bite and because the proposal, devised by the Service Employees International Union and United Healthcare Workers West, exempts up to $10 million in retirement savings. (Rich jerks use Roth IRAs as tax shelters; Thiel sheltered $5 billion in his.)
The purpose of California’s proposed tax, on which the SEIU has only just started to collect signatures to get it onto the ballot this fall, is mostly to plug a $19 billion annual hole in federal Medicaid funding for California left by last year’s budget reconciliation bill. I’d be fine with California extracting that whole $19 billion from Thiel. (He’d still have $6 billion left.) Thiel didn’t donate to Trump in 2024, but he spent $1.5 million to elect Trump in 2016; last year, Thiel gave $852,200 to House Speaker Mike Johnson’s Grow the Majority PAC, which will boost Trump-compliant Republican candidates in this year’s midterms; and the budget bill is expected to invest so much cash in Palantir, the defense contractor of which Thiel is chairman, that Palantir’s stock price shot up 150 percent in 2025.
Reluctantly, though, I must agree with the California Governor Gavin Newsom, a leading contender for the Democrats’ 2028 presidential nomination, that the 2026 California Billionaire Tax Act is not a particularly good idea. This puts both Newsom and myself in distasteful company. In addition to Thiel and Page, Bill Ackman, who doesn’t live in California, opposes the proposed tax, and I expect other billionaire blowhards will line up against it in the coming week, and probably President Donald Trump.
My reason for opposing a broad-based wealth tax is the opposite of Ackman’s. He’s against it because it would be “an expropriation of private property.” I’m against it because I don’t believe much expropriation would result after billionaires got done shifting their assets around to avoid the tax. It’s hard enough just to tax income! Before this country starts messing around with major wealth taxes (which have a miserable track record in other countries), we ought to tax high incomes—not just billionaires—at a much higher rate, and increase capital gains and corporate tax rates as well. All these income-based taxes stand today at what, historically, are appallingly low levels.
If Trump does come out against California’s billionaire tax, he will likely ignore (and perhaps outright deny) that he was once a wealth-tax advocate himself. Nobody ever talks about this, but back in 1999 Trump was even more rabid on this subject than the SEIU; he favored a one-time tax not of 5 percent but of 14.25 percent, not on billionaires but on anyone whose net worth exceeded $10 million, the equivalent of about $20 million today.
Trump, then seeking the 2000 presidential nomination from Ross Perot’s Reform Party ticket, said the tax was necessary to retire the national debt. Roger Stone, who was running Trump’s exploratory campaign committee, told The Los Angeles Times, “Mr. Trump is a graduate of the Wharton School of Finance, and this is something he has been thinking about for some time. The concept of a onetime tax on the super-wealthy is something he feels strongly about, and he has worked with a team of economists to bring it to life.” Trump dropped out in February 2020, and Pat Buchanan won the nomination instead. The Reform Party imploded soon after.
But evidence of Trump’s Bolshie past lives on in his would-be campaign book, The America We Deserve (2000). “The rich will scream,” Trump wrote, and “the pundits and editorial-board writers will warn of dire consequences resulting from my proposal—a stock market crash, a depression, unemployment, and so on. Notice that the people making such objections would have something personal to lose. Many of the doomsayers work for wealthy special interests.” Trump’s ghost writer, Dave Shiflett, later recalled that the Trump he knew at the turn of the 21st century was also “a big fan of diversity, inclusiveness and civility.” Trump’s campaign book even flirted with socialized medicine: “My critics will say that … a single-payer agency plan would create a gigantic agency to distribute funds to doctors. I’d point out that by creating one agency we do away with hundreds of smaller ones that are hard to monitor.”
It was, of course, a very long time ago.
The trouble with Trump’s 14.25 percent tax on fortunes north of $20 million, and the trouble with the SEIU’s more modest 5 percent tax on fortunes north of $1 billion, is that these are wealth taxes. A dozen years ago, at a Brookings panel on Thomas Piketty’s Capital in the Twenty-First Century, I pointed out to the great man that wealth taxes were kind of a hard sell in the United States. “What about property taxes?” Piketty replied. That shut me up, but after further reflection it occurred to me that these are such a touchy subject this side of the Atlantic that when the Great Inflation of the 1970s pushed up property taxes in California, the result was Proposition 13 and a national tax revolt that inspired candidate Ronald Reagan to slash top income-tax rates. Not again, thank you very much.
Politics aside, nearly every OECD country that’s tried to impose a broad-based wealth tax ended up repealing it. When these wealth taxes didn’t chase rich people out, they raised a pittance in revenue; in some instances, they managed to do both at the same time. France, Sweden, Austria, Denmark, Germany, the Netherlands, Finland, Iceland, and Luxembourg all discarded their wealth taxes. (This and the following data come courtesy of the nonprofit Tax Foundation.)
Today only four OECD countries still have wealth taxes: Colombia, Norway, Switzerland, and Spain—and in the latter country, regional governments in Madrid, Andalusia, and Galicia are trying to get rid of it. Excepting Colombia (where the wealth tax rises gradually to a maximum of 5 percent) wealth is never taxed so high as 5 percent. In Switzerland, wealth taxes vary by canton, but the rate is always below one percent. In Norway it’s 1.1 percent. In Spain the maximum rate is 3.5 percent.
In Norway and Spain, wealth taxes bring in revenues equal to 1.5 percent and 0.57 percent, respectively, of total tax revenue. In Switzerland the haul is a more impressive 4.3 percent, mainly because—supply-side theorists rejoice!—the wealth tax has never been high enough to drive wealthy Swiss out of the country. It may help that Switzerland’s wealth tax is no novelty; it’s been around since the nineteenth century. Even in Switzerland, though, the wealth-tax haul represents only 1.2 percent of GDP.
If the gentle social Democrats of western Europe can’t make a success with a wealth tax, what chance is there that we American brutes can? At best, the campaign to create a billionaire wealth tax in California will put pressure on Washington to finally increase income-based taxes nationally on the wealthy. In that limited sense, I’d be for it. But I don’t think a wealth tax is in itself a good idea.