Episode summary
Golden State or Golden Exit? Experts debate the California wealth tax
Summary
The discussion centered on California’s proposed 5% tax on billionaires, with Gabriel Zucman arguing that Proposition 40 is both politically viable and necessary to protect public services, while Josh Rauh argued it would drive capital and founders out of the state. Zucman said the wealth tax would hit a small number of ultra-rich residents whose fortunes have surged, and he tied the measure to preserving Medi-Cal coverage and broader fiscal capacity.
Rauh countered that California does not face a revenue crisis and that the state has already seen enough spending growth to justify a closer look at efficiency rather than new taxes. He argued the proposal would reduce future income-tax collections, weaken the startup ecosystem, and encourage wealthy residents to change their tax residence.
The two also clashed over whether billionaires already pay enough tax and whether state-level wealth taxes can work without triggering avoidance. Zucman said the measure could become a model for federal policy, while Rauh said many of the headline concerns about “buy, borrow, die” and similar strategies are overstated and that loophole-closing would be a better path than taxing unrealized gains.
Key takeaways
- Gabriel Zucman said Proposition 40 has a good chance to pass because support for taxing billionaires is widespread, despite more than $300 million spent against it.
- Josh Rauh said prediction markets imply only a 25% to 30% chance of passage and argued the tax would shrink California’s future income-tax base.
- Zucman argued that 250 billionaires could pay 5% of their wealth to help preserve health coverage for 3 million Californians.
- Rauh said California’s general fund spending is up 79% over seven years and that the state should focus on spending efficiency before raising taxes.
- Both sides agreed loopholes should be examined, but Rauh said taxing unrealized gains is the wrong tool and Zucman said income-tax fixes alone would not reach billionaires who report little or no income.
Notable quotes
“I THINK IT HAS A GOOD CHANCE TO PASS. I THINK THERE'S OVERWHELMING DEMAND AND POPULAR SUPPORT FOR TAXING BILLIONAIRES”
“THIS TAX IS GOING TO BE NOT A REVENUE COLLECTOR FOR CALIFORNIA BECAUSE OF THE NET LOSSES FROM THE FUTURE STREAMS OF INCOME TAXES”
“NO, THE COMPANY IS NOT PAYING FOR HIM TO STAY. HE WOULD PAY THE WEALTH TAX”
“THE IDEA THAT WE NEED MORE REVENUE IS JUST A FLAWED IDEA”
How the episode opens
Welcome back to squawk box california.
Ways to propose 5% tax on billionaires. Some economists are questioning whether this unprecedented wealth tax is a necessary step for economic equity, or a recipe for a massive capital flight. Joining us right now is paris school of economics professor gabriel zuckerman.
He is a uc berkeley summer research professor, founding director of the international tax observatory, and the author of we need to tax billionaires and stanford university's finance professor and hoover institution senior fellow josh rauch. Good morning to both of you. Before we get into the debate itself, I'm curious where you think the actual polls are and what you think is actually going to happen here.
Gabriel.
I think it has a good chance to pass. I think there's overwhelming demand and popular support for taxing billionaires. Now, of course, billionaires have spent more than $300 million to fight proposition 40, the california billionaire tax. So this might have some effect on the vote. But what we see everywhere in california, in the us and globally is that this is hugely popular.
Well, it's it's it's surprising. It wouldn't be popular though. Have you been surprised, joshua, that in some cases, depending on how you look at the polls, it hasn't been more popular.
Well, prediction markets say it's only got about a 25 or 30% chance of passing. And that's what I think is going to happen. I think people are listening to the reason that's coming out.
That shows that this tax is going to be not a revenue collector for california because of the net losses from the future streams of income taxes that will not be paid by all the billionaires who are left. And the fact that it's going to be bad for the economy when founders leave california, when the startup ecosystem is threatened, they take their jobs with them.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- california wealth tax
- billionaires tax
- economic equity
- capital flight
- tax policy
Watch the episode
Watch “Golden State or Golden Exit? Experts debate the California wealth tax” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from CNBC Squawk Box
-
Rep. John Moolenaar on investigating Nvidia's Jensen Huang: CCP influence raises multiple concerns -
Jensen Huang's affair has gone from a personal scandal to a corporate governance issue: Paul Argenti -
Experts react to the October CPI report -
Fairlead's Katie Stockton on market selloff: Don't sell weakness, sell the strength -
Ron Baron on his Musk investments: Can make 'hundreds of billions of dollars' over the next 10 years -
Tech selloff looks like a normal correction, says JPMorgan's Jack Caffrey
CNBC Squawk Box, this episode and its artwork belong to their owners. Octagon is not affiliated with the show; this page is an independent summary.
