When Elon Musk relocated his business empire from California to Texas in 2021, he likely took billions in state tax revenue with him.
Some California lawmakers want to claw back that lost revenue through a “wealth tax” proposal that would levy a 1.5% tax on billionaires. The bill would permit the state to pursue the tax for former residents, such as Musk, who fled for tax-friendly states.
“Wealth tax” proposals are increasingly in vogue – eight states have introduced a version of one this year – in part because of the extreme concentration of wealth among the nation’s top earners. The chasm between rich and poor has never been more clear: the top 10 percent of earners in the U.S. own 69 percent of the nation’s total wealth. Billionaires enjoy a plethora of tax loopholes that allow them to pay virtually no federal income tax. Musk, for instance, paid no federal income tax in 2018, despite seeing his wealth grow by nearly $14 billion over the previous four years.
Still, Texas is in no danger of joining the wealth tax party. Heck, even California doesn’t appear to have the stomach for it. The state’s Gov. Gavin Newsom said recently that the wealth tax bill is “going nowhere.”
So why, then, are Texans being asked this November to consider Proposition 3, a constitutional amendment prohibiting the state Legislature from imposing a tax based on wealth or net worth of an individual or family? There doesn’t appear to be much of a groundswell for such a tax and there aren’t any active proposals in Texas. State Rep. Cole Hefner (R-Mt. Pleasant), the author of the constitutional amendment, told the House Ways & Means Committee in March that it was a “proactive measure” inspired by proposals from “some members of Congress” to impose a national wealth tax.
Yet enshrining a tax policy ban in the Constitution strikes us as shortsighted. Who’s to say what Texas’ economic outlook will be 30 years from now? It would be foolish to take it off the table entirely as new technologies, such as artificial intelligence, could further concentrate wealth in the hands of a tiny few.
Hefner believes the “people should have a direct say” on whether they should be subjected to a new tax. We agree, which is why if, years from now, a majority of future Texans want to impose a wealth tax, they shouldn’t have to get two-thirds of each chamber to overturn a constitutional amendment to do so.
We urge Texans to vote “no” on Proposition 3 and give future generations the flexibility to craft a tax policy that reflects the will of the people and the needs of the state.
I covered some of this ground yesterday, and I’m glad to see that the Chron editorial board gets it. As I said, I’m aware of a grassroots campaign that is gearing up against this, but time is short and there are a lot of voters to reach, so please spread the word if you can. You might also look to see how your State Rep voted, because Republicans could not have gotten this piece of junk across the finish line without some help.