California is chasing wealth that has feet

California could collect billions by taxing land value instead of mobile billionaire wealth.

California has placed a 5% one-time wealth tax on its billionaires on the November ballot, aiming to raise approximately $20 billion annually for healthcare, food aid, and schools. This initiative, however, faces significant challenges because the targeted wealth is mobile. The state's land value is estimated at $8.14 trillion, a far larger and immovable tax base. Wealthy individuals, including six billionaires who have already moved their tax residency out of state before the measure's cutoff, can relocate their assets. The wealth tax's projected base is likely inflated by up to 2x due to such wealth flight and potential overestimations in its own models. This dynamic means that to meet revenue targets, the tax rate might need to increase, potentially driving more billionaires to leave, thus undermining the tax's effectiveness.

The proposed billionaire wealth tax highlights a fundamental misunderstanding of wealth mobility versus the immobility of real estate. California's land alone represents a taxable asset base eight times larger than its billionaire wealth, and crucially, it cannot relocate. This stark contrast suggests that policies targeting mobile assets are inherently less stable and prone to failure compared to those leveraging immovable property values.

The state's reliance on income tax, a consequence of Proposition 13's effective property tax limitations, has created a revenue system vulnerable to outward migration of high earners. A shift towards land value taxation, where taxes are levied solely on the unimproved value of land, offers a stable, growth-aligned revenue stream that captures public value creation and avoids penalizing economic activity or mobility.