Not even Nobel Prize winners can save the billionaire tax

You can usually tell a controversial idea like the “billionaire tax” is bad when proponents start trotting out teams of Nobel Prize winners to defend it.If the idea really were that good, you wouldn’t need more than one Nobel laureate to make the case.The “tell” is when they quote half a dozen, as if there were a Nobel Prize for groupthink.

Six Nobel Prize-winning economists recently signed a letter urging Californians to pass Proposition 40, the one-time 5% tax on the wealth of the state’s billionaires.The letter is wrong about everything, from the history of wealth taxes to the proceeds California can expect the tax to provide.The letter calls Prop.40 “the first-ever tax on billionaire wealth enacted anywhere in the world.” Governments have taxed billionaires’ net wealth for decades.Twelve European countries imposed annual net wealth taxes in the 1990s.

They raised very little revenue, cost a lot to administer, pushed investment out of their countries, and were politically unpopular.All but three of the European wealth taxes have been repealed. The letter claims that California billionaires paid income tax equal to just 1.6% of their wealth gains.

This is also misleading.1.6% is not an income-tax rate.

It is income taxes paid divided by an increase in estimated asset values, much of it unrealized.We don’t tax gains on paper.Not for the rich, and not for the middle class.

If we did, homeowners would have to pay a tax every year that their home went up in value, even if they were still living in it.The wealthy actually pay heavy taxes.That’s why when a Biden-era US Treasury study estimated tax payments by wealth, the results showed the wealthiest Americans paid total tax rates of almost 60% of annual income, the highest of any group.

And roughly double the rate of the average taxpayer. Then there is the promised $100 billion in new tax receipts.California’s nonpartisan Legislative Analyst’s Office does not endorse that number, e...