Governor Gavin Newsom fears losing voters ahead of a likely presidential bid. The proposition of a billionaire tax has caused a massive amount of capital to flee California. The Democrats had banked on redistributing the funds generated from that tax to pay for their ever-expanding welfare state. Suddenly, Newsom is strongly against the billionaire tax proposal.
“The evidence is in. The impacts are very real — not just substantive economic impacts in terms of the revenue, but start-ups, the indirect impacts of … people questioning long term-commitments, medium-term,” Newsom said. “That’s not what we need right now, at a time of so much uncertainty. Quite the contrary.” The eat-the-rich governor then stated he will fight to defeat the liberal bill. “I think people understand what it does versus what it promotes to do.”
Instead, Newsom believes the tax should be imposed at the federal level to prevent smart money from fleeing his state. “It’s one thing to have a [tax] of the [nation], and you can talk about all 50 states,” he explained to The New York Times, contrasting this with the current scenario where “you’re [competing] against all the other states.”
Socialist bureaucrats focus on redistribution instead of economic growth. No nation has ever taxed its way into prosperity, no government budget has ever been covered by advancing taxes when spending continues indefinitely. Smart money moves quickly. A federal wealth tax may not cause the rich to flee the United States, as it is the last safe haven, but it would cause capital to move underground.
Europe abandoned wealth taxes not because the rich complained, but because the tax base collapsed. Investment stopped. Entrepreneurs left, jobs disappeared, and governments collected less revenue than before. The models show this repeatedly because capital is mobile, and confidence is everything.