While the ballot measure has many supporters – including some billionaires like Nvidia CEO Jensen Huang – it has faced fierce opposition from a variety of figures, from billionaires to the state’s liberal governor.
Google co-founder Sergey Brin has given more than $100m to a political organisation funding ballot measures that could block the wealth tax, the Los Angeles Times reports, external.
California Governor Gavin Newsom, whose tenure is coming to an end, is perhaps the most notable political leader opposing it. He has voiced concerns that the measure could cause the wealthy to leave the state and drive out their crucial income tax revenue.
A September poll, external from the Berkeley Institute of Governmental Studies and the Los Angeles Times found the proposition has not clearly won over a majority of voters, with 45% of likely voters in favour of the tax, 42% opposed and 13% undecided.
The statewide ballot measure would need to be approved by a majority of residents.
California is not the first place to toy with the idea of taxing the rich. Also on the West Coast, voters in US state of Washington are considering whether to accept or reject a “millionaires tax” – a 9.9% tax on income over $1m a year.
While wealth taxes were once a fairly common form of taxation in Europe, they have rapidly fallen out of favour and now only exist in three European countries – Spain, Norway and Switzerland, says Dr Kristian Niemietz, head of political economy at the Institute of Economic Affairs.
Niemietz believes wealth taxes are “more trouble than they are worth” because they cause administrative issues, suppress investment, lead to capital flight and, in the end, do not raise much revenue.
In the case of Norway, a local news organisation found that an increase in the wealth tax led to more super wealthy people leaving the country in 2022, external than in the preceding 13 years combined. A study on Switzerland, external found that a 0.1 percentage point increase in a wealth tax reduced taxable wealth by 3.5%.
