California's Billionaire-Drain

California's Proposition 40, a one-time wealth tax of resident billionaires is on the ballot. Economists and conservative media outlets argue, correctly that this is a terrible idea from the standpoint of the government increasing its tax revenue.

(We'll set aside our disappointment that none express any degree of moral outrage at this brazen violation of individual rights.)

Megan McArdle takes this line of argument further, considering what dueling economists are saying about the potential impact of such a measure -- and assuming in order to make their cases.

In addition to questioning assumptions about what the billionaires might do in response to such a measure, she considers what this "group of the world's most mobile people" are doing:

Several California billionaires have already announced their departures, including Peter Thiel and Google founders Larry Page and Sergey Brin. [Wealth tax proponent Gabriel] Zucman's paper notes that if some of the most prominent tech barons succeed in fleeing, revenue estimates fall to $89 billion, but then argues that there are many small-fry billionaires who escape Forbes's wealth rankings but still have to pay the tax. Adding them back in raises revenue to $115 billion.

This assumes the undetected small fry haven't done their best to exit, but why would we assume that? Why should we believe that those who loudly announced they were shifting their residency before the year began were the only people who fled ahead of the SEIU initiative?

Mike Solana, the chief marketing officer at Founders Fund (where Thiel is a partner) and founder of tech site Pirate Wires, reported speaking with 20 billionaires who would be affected by the wealth tax. They comprise about 10 percent of the state's known billionaires. All 20, including some Democrats, said they were making exit plans; three said they'd already left. You can dismiss Solana as a Thiel acolyte, but I've heard from others in those circles that most of the state's billionaires are planning their departure, if they haven't already left. [bold added]

McArdle then notes that economists aren't the only people on earth capable of making assumptions:

They probably assume that if the tax succeeds, progressives will come back for an encore. And if it fails, they'll try, try again. Those seem like sound assumptions -- sounder, in fact, than the assumption that Californians can grab 5 percent of everything the billionaires have, and the billionaires will just have to sit there and let them take it.

It is interesting to consider the idea that California's nasty threat to retroactively confiscate so much money might already be backfiring.

-- CAV