Wealth taxes hurt the working class and are difficult to implement – empirics prove

By design, the wealth tax will further increase this tax burden. Should the affluent abandon California because of the greater drain on their assets – and history shows this will happen – they will take with them the dollars needed to fund schools, public safety, health care, and other public services utilized by Californians. Investment in the state economy, which creates jobs and wealth across all classes, should also decline.

This won’t hurt the moneyed residents who leave. They will be fine. The damage will be felt in the lower and middle classes.

Simply put, confiscatory tax rates are economically destructive. As we documented in  on California’s outmigration problem, the outflow of people, businesses, and wealth from the state is troublingly large and accelerating. It is why for the first time in history California lost representation in Congress. A massive tax hike on the rich would further incentivize them to leave, costing California billions in revenues.

This is exactly what happened in France due to its wealth tax. Before its wealth tax was repealed, France  42,000 millionaires between 2000 and 2012. The loss of the tax base also means that the revenues raised from wealth taxes are inevitably disappointing. Acknowledging the migration incentives of the wealth tax, the bill would tax wealthy people’s assets, at a declining rate, for years after leaving the state. The legality of such a tax is questionable and there will likely be years of legal proceedings hashing out this question.

The administrative difficulties are also problematic. Multi-millionaires and billionaires hold most of their wealth as assets. Some, such as stocks and bonds, will be easy to value. Many others will be difficult to appraise. How do you value the worth of a privately-owned business that is not publicly traded? How about a ranch that has been in family for generations?

Accurately administering a wealth tax requires Sacramento’s bureaucrats to precisely calculate the worth of these assets. This will require a huge increase in the number of tax administrators.

It is also unlikely that the target of the wealth tax will remain on just a few. The history of the personal income tax demonstrates that, ultimately, the taxes are applied to everyone.