Economists Against The California Wealth Tax (Prop. 40)

We, the undersigned economists, write to express our opposition to Proposition 40, a proposal on the November 3 ballot to impose a 5% wealth tax in California on covered wealth of billionaires.

We believe that a wealth tax would introduce significant economic costs, administrative challenges, legal uncertainty, and unintended consequences that could undermine California's long-term economic prosperity.

A wealth tax risks discouraging investment, entrepreneurship, and economic growth. By taxing accumulated wealth rather than realized income or consumption, such a tax could reduce future incentives to save, invest, and build businesses. The potential economic costs and revenue uncertainty associated with a wealth tax warrant particular caution. The ultimate fiscal benefits and costs of the wealth tax would depend on behavioral responses that are difficult to predict, including changes in investment, residency, and tax planning. California already has the highest state income tax rate in the nation making behavioral responses to further taxation particularly acute. There is already evidence that a considerable number have already left California to avoid any possibility of paying a potential Prop 40 wealth tax.

There is no guarantee or commitment device that can ensure that a wealth tax can only be imposed once. There is always a risk that another wealth tax could be imposed again. Such reputational harm could further drive capital and taxpayers out of California. 

From an administrative perspective, wealth taxes present substantial valuation and compliance challenges. Accurately valuing privately held businesses, intellectual property, and other illiquid assets on a recurring basis is inherently difficult. These challenges could impose significant costs on taxpayers and tax administrators, while increasing uncertainty and disputes. These effects may be particularly consequential for entrepreneurs and business owners whose wealth is tied up in illiquid assets. Dealing with such illiquid assets and how a tax would be paid on them poses a further challenge to such a tax.

From a legal perspective, there are several legal questions about the retroactive nature of the tax, interstate taxation, and constitutional restrictions on taxing intangible property.

California operates within a highly integrated national economy in which individuals, businesses, and investment capital can relocate across state lines. A state-level wealth tax could create incentives for high-net-worth individuals and entrepreneurs to relocate or shift future investment elsewhere, potentially weakening the state's long-term tax base. California's economic success, from Hollywood to Silicon Valley, has historically depended in substantial part on its ability to attract talent, capital, innovation, and entrepreneurial activity. Tax policy should seek to preserve these advantages while providing stable public revenues.

For these reasons, we urge California voters to reject Proposition 40. We instead recommend approaches to taxation that minimize economic distortions, promote investment and growth, and provide a more predictable and administratively workable revenue base. 

Current list of signatories (affiliations are for identification purposes only):

Nobel Laureates

Robert Aumann, Nobel Laureate and Hebrew University of Jerusalem

Eugene Fama, Nobel Laureate and University of Chicago Booth School of Business

Lars Peter Hansen, Nobel Laureate and University of Chicago 

James Heckman, Nobel Laureate and University of Chicago 

Former U.S. Government Officials 

Michael J. Boskin, Hoover Institution and Department of Economics, Stanford University, former Chairman, President's Council of Economic Advisers.

Glenn Hubbard, Columbia University and former White House Chair of the Council of Economic Advisers 

Richard Burkhauser, University of Texas at Austin, Civitas Institute, former Member of the Council of Economic Advisers

Joshua Rauh, Stanford Graduate School of Business, Hoover Institution, Stanford University, and former White House Council of Economic Advisers Chief Economist

Michael Faulkender, University of Maryland and former Deputy Secretary of the U.S. Treasury 

Doug Holtz-Eakin, American Action Forum and Former Congressional Budget Office Director

John F. Cogan, Hoover Institution, Stanford University and former Deputy Director U.S. Office of Management and Budget

Economists 

Burton Abrams, University of Delaware (Emeritus)

Zoltan J. Acs, George Mason University (Emeritus) 

Richard Agnello, Professor of Economics Emeritus, University of Delaware

James C.W. Ahiakpor, California State University, East Bay

Scott L. Baier, Clemson University

Ray Ball, The University of Chicago, Booth School of Business,

Sanjai Bhagat, University of Colorado

Michael Bond, Arizona State University

Donald J. Boudreaux, George Mason University

Charles W. Calomiris, Columbia University

Jeff Campbell, University of Notre Dame

Scott Carrell, University of Texas at Austin

Julia R. Cartwright, American Institute for Economic Research 

Don Chance, Louisiana State University

K.C. Chen, California State University, Fresno

Mark Crain, Lafayette College

Kevin Corinth, American Enterprise Institute

Mike Cosgrove, University of Dallas, Professor Emeritus

Sherri Dallaire, University of Alaska

Steven J. Davis, Hoover Institution, Stanford University

Harry DeAngelo, Marshall School of Business, University of Southern California

John Diamond, Rice University, Baker Institute

Daniel DiMartino, Manhattan Institute

William R. Dougan, Clemson University

Gerald Dwyer, Clemson University

Martin Eichenbaum, Northwestern University

Charles Elson, University of Delaware

Richard E. Ericson, East Carolina University

Michael Farren, Hoover Institution

Jesus Fernandez-Villaverde, University of Pennsylvania

Christopher Flinn, New York University

Kenneth R. French, Dartmouth, Emeritus

Vincent Geloso, George Mason University 

Phil Gramm, American Enterprise Institute

Philip E. Graves, University of Colorado Boulder

Dennis Halcoussis, California State University, Northridge

Jonathan S. Hartley, UT-Austin, School of Civic Leadership and Hoover Institution, Stanford University

Janice A. Hauge, University of North Texas

Thomas Hazlett, Clemson University, Former Chief Economist, FCC

David R. Henderson, Hoover Institution, Stanford University

James Henderson, Baylor University

Randall Holcombe, Florida State University

Jeffrey L. Hoopes, University of North Carolina at Chapel Hill

Thomas N. Hubbard, Northwestern University

Mark A. Jamison, University of Florida, Warrington College of Business

Dennis Jansen, Texas A&M University

Ben Jaros, Hoover Institution, Stanford University

Filip Jolevski, Mercatus Center

Kenneth L. Judd, Hoover Institution, Stanford University

Joseph P. Kalt, Harvard Kennedy School (emeritus)

Tim Kane, University of Austin

Barry Keating, University of Notre Dame, Mendoza College of Business

Wojciech Kopczuk, Columbia University

Stan Liebowitz, University of Texas-Dallas, Jindal School of Management

Edward J. Lopez, Western Carolina University and Independent Institute

Tim Loughran, University of Notre Dame 

Phillip Magness, Independent Institute

Iván Marinovic, Stanford Graduate School of Business

Michael L. Marlow, California Polytechnic State University

Patrick A. McLaughlin, Hoover Institution, Stanford University, and Pacific Legal Foundation

Bill Megginson, University of Oklahoma  

Adam A. Millsap, Stand Together Trust

Jack Mintz, University of Calgary

James Moncur, University of Hawaii at Manoa

Steve Moore, Committee To Unleash Prosperity

Peter Morici, University of Maryland Robert H. Smith School of Business

Jonathan Newman, Mises Institute

Robert Niehaus, Robert D. Niehaus, Inc.

Lee Ohanian, UCLA

Richard A. Palfin, Forensic Economist (retired)

Judd W. Patton,  Professor Emeritus in Economics, Retired, Bellevue University

G. Michael Phillips, California State University Northridge

James Prieger, Pepperdine University

Gary Quinlivan, Saint Vincent College, Alex G. McKenna School of Business, Economics, and Government (Emeritus)

Nancy Roberts, Professor Emeritus, Arizona State University.
Richard Roll, UCLA and Caltech

Steven Rosefielde, Professor Economics, University of North Carolina, Chapel Hill

John Ruggiero, University of Dayton

Philip Rushing, University of Illinois

Joseph Salerno, Mises Institute

Robert M. Sauer, Bar Ilan University

Allison Schrager, Manhattan Institute

Steven Sheffrin, Tulane University 

Ann Sherman, DePaul University

Michael Strain, American Enterprise Institute

Daniel Sumner, UC-Davis

Robert Tamura, Clemson University

T. Craig Tapley, University of Florida, Warrington College of Business

David Tufte, Southern Utah University

Carl J. Ullrich, James Madison University