Reagan economist warns billionaire tax would ‘destroy’ California
Proposition 40 would tax 5% of net worth above $1B, with 90% of revenue going to healthcare programs
Taxing the rich has never worked: Art Laffer
Former Reagan economic advisor Art Laffer discusses California's billionaire wealth tax during an appearance on 'Varney & Co.'
California voters are set to decide on a one-time wealth tax on billionaires, a proposal former Reagan economic advisor Art Laffer warns could accelerate an exodus of the state’s wealthiest residents.
Laffer joined FOX Business’ Stuart Varney on "Varney & Co." to discuss California’s Proposition 40 and the broader push for wealth taxes.
Signs supporting a proposed California billionaire wealth tax are displayed as the measure draws debate over its potential economic impact and the risk of wealthy residents leaving the state. (Caroline Brehman/Bloomberg / Getty Images)
Proposition 40 would impose a one-time tax equal to 5% of net worth on people who were California residents on Jan. 1, 2026, and had more than $1 billion in covered assets. Real estate, pensions and retirement accounts generally would be excluded. Ninety percent of the revenue would go toward healthcare, according to the state’s Legislative Analyst’s Office.
Laffer argued the measure could make California less attractive to people building and holding large fortunes.
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"It is the single most important proposition on ballot today in America. It really is a big, big deal, this wealth tax. And it would destroy California, it really would," Laffer said.
"No one would want to go there to build their wealth only to be faced with this type of tax. It would cause an exodus of billionaires, which have not left California because the income taxes do not affect the billionaires much at all. This tax would really affect them," he continued.
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The Legislative Analyst’s Office estimates the tax could generate tens of billions of dollars over several years, but says responses, including some billionaires leaving California, could reduce state income-tax revenue by less than $1 billion annually.
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Laffer also tied the debate to a push for taxing wealth, invoking the Democratic Socialists of America, while arguing such policies have failed.
"We go back to Karl Marx on taxing the rich… Everyone has wanted to tax the rich through ages. And it’s never worked. It’s really never worked, and in this case it won’t work either," Laffer said.
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While Laffer said he does not take the broader socialist movement seriously, he drew a distinction with the California proposal.
"The ballot proposition in California is a serious one, but it would just ruin California," he said.
