California’s billionaire tax will make California’s high-speed rail dream come true?

California proposes to confiscate roughly 5 percent of California billionaires’ wealth (Prop. 40 in the November election). Let’s ignore the fact that the first $1 billion in net worth is exempt and assume that California can harvest 5% of all billionaire wealth. Would that be sufficient to pay for a single high-speed rail line at California government project rates?

ChatGPT says the combined wealth of all of the billionaire douches (about 260 of them) in California is approximately $2.4 trillion, so a very rough estimate of the tax harvest is $120 billion. In fact, advocates of Prop. 40 say that they’ll get $100 billion. Here’s the neutral language of what voters are fed by nonpartisan election officials: “It will raise about $100 billion to replace the funding Trump and his billionaire donors took from working people to line their pockets.” This assumes that nobody moves out of Paradise to Hell (California to tax-free New Hampshire, Tennessee, Miami/Palm Beach, Austin, etc.), which, in any case wouldn’t reduce revenues from this new wealth tax (“The measure would apply the tax to billionaires who were California residents on January 1, 2026“).

Assuming that the advocates are correct and everything works as advertised, how many awesome high-speed rail lines could be built for $100 billion? The projected cost of the 30-year-old single line high-speed rail project is now up to $230 billion (Deplorables at Fox).

Imagine being the richest state in the U.S., imposing an entirely new kind of tax on the richest residents of that state, and still not having enough money to build the kind of railroad that folks in Japan, China, Europe, and Morocco are able to afford and build!

(I’m personally a fan of Prop. 40. California’s billionaires sat still for the 13% state income tax. Moving out of California won’t enable a rich douche to escape the 5% wealth haircut. Maybe a handful of people with assets between $25 million and $1 billion will move out for fear that the next election will hit the “almost rich” with a 5-10% wealth tax, but 23-year-old AI billionaires will quickly replace them. Californians are absurdly undertaxed, despite headlines and appearances. The owners of commercial property may pay almost nothing in property tax due to a combination of Prop. 13 and inflation (they pay tax on the nominal value of the property at the time of purchase plus 2% per year). There is no state estate tax, which makes California a good place for passing down the “generational wealth” that Californians say shouldn’t be possible to pass down. You’d think the peasants would revolt and say that Prop. 13 doesn’t apply to properties worth more than $2 million and that California will take 16% (the Maskachusetts/New York rate) of estates worth over $2 million. But for some reason these obvious methods of reducing inequality are never highlighted or put on the ballot.)

Irrelevant, in my view… “The Net Present Value of the California Billionaire Tax Act” (NBER) says that the tax will actually reduce net tax revenue for the state by about $39 billion over 10 years. The economists behind the paper claim that the billionaire targets of the tax will move out and, therefore, stop paying California’s 13.3% state income tax. Why is that irrelevant? $4 billion/year is only about 1% per year of the state government’s colossal spending. Californians say that they hate inequality and, therefore, they should be happy to bear 1% more of the cost of running their government in exchange for getting rid of some of their richest douches. I would feel more pride of ownership in our 2021 Honda Odyssey if we could expel from the neighborhood the guy with the new Rolls-Royce and also the guy with the 2005 Ford GT. And maybe the other guy with the Rolls-Royce who has been observed (by our 5th grader) picking up in the car line at the local public elementary school. Would that be worth paying more in tax? Sure. If my envy level were high enough, it could even be worth paying 10% more in taxes (property and sales here in Florida; we have no income or estate tax).