Has California Rejected a Wealth Tax?

A potential win for free-market conservatism and common sense is brewing, in California, of all places, amid the leftward lurch of the midterm elections. Feature how the Golden State’s proposed wealth tax is running behind in the vote count — at least so far. As of this morning, with 60 percent of the ballots counted, the opponents of the purportedly one-time levy were leading with 55.6 percent of the vote. Advocates of the tax so far have 44.4 percent.The nonpartisan CalMatters reports that the tax “appeared headed for defeat.” In such a liberal state, the uncertain fate of the tax offers grounds for optimism that the class warfare rhetoric of the levy’s backers failed to sway voters. A separate ballot initiative barring future levies on assets and savings is leading, too, in the vote count. As of the latest reporting, 54.3 percent of voters backed a proposed wealth tax ban, while only 45.7 percent opposed the measure. The voter doubts about wealth taxes come in a state whose voters supported the Democratic candidate for governor, Xavier Becerra, with 64 percent of the votes tallied so far versus 36 percent for the Republican challenger, Steve Hilton. That race has been called by the Associated Press for Mr. Becerra. Similarly, the Democratic candidate for attorney general, Rob Bonta, is expected to win, having received 63.8 percent of ballots counted so far.It’s not our intention to ignore the chance that the wealth tax could yet pass. The AP cautions that some six million votes remain uncounted. Yet the gap in support among the state’s generally left-leaning voters between Democratic candidates and the wealth tax suggests that the measure could be in trouble. That would vindicate pre-election polling that found only 46 percent of likely voters backed the proposed wealth levy, as Politico reported.The absence of a majority support before Election Day was what “ballot initiative veterans” called “a red flag,” per Politico. Voters could well have been swayed by the analysis by two Hoover Institution economists, Benjamin Jaros and Joshua Rauh, that the proposed levy on wealth would cause a fiscal catastrophe for California. Their research was at odds with claims by the tax’s backers that the levy would bring in some $100 billion.To the contrary, Messrs. Jaros and Rauh found in a study published by the National Bureau of Economic Research that the levy would yield but some $30 billion, partly because many billionaires had fled the state for lower-tax jurisdictions. Even worse, the economists find that the tax would end up costing the state some $40 billion in lost revenue because of the reduction to the state’s tax base. The mobility of taxpayers has long been a hurdle for wealth taxes.Ahead of the vote, doubts arose, too, over whether the tax would be, as promised, only a one-time levy. A Berkeley economist, Antoine Levy, marvels on X that in a state like California, where Democrats hold a 14-point advantage in voting, the idea of “wealth taxes not only failing but a permanent wealth tax prohibition likely passing feels like something that people who tell us they know better about the will of the people should pay attention to.”

Has California Rejected a Wealth Tax?

Has California Rejected a Wealth Tax?

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