When entrepreneurs and wealth managers warn that a proposed tax on billionaires will trigger a mass exodus from California, they are, perhaps without meaning to, making the progressive case for the policy rather than against it. The argument that the ultra-wealthy will simply pack their bags and leave if asked to contribute more to the society that enabled their fortunes is not a neutral economic observation — it is a political threat, and it deserves to be treated as one. California’s Proposition 40, which would impose a one-time 5% levy on the net worth of billionaires who were state residents as of January 1, 2026, represents exactly the kind of structural redistribution that a state grappling with profound inequality has every right to pursue.
The loudest warning so far has come from Eric Schiffer, chairman of the family office Patriarch and CEO of Reputation Management Consultants, who told Fox Business that the measure would produce a “giant sucking sound” of entrepreneurs fleeing California. Schiffer, who advises several billionaire clients including some based in California, predicted that the state’s most successful business leaders would say “No mas, I’m out” rather than submit to a tax on wealth they had already been taxed on once. He went further, suggesting that if the tax were ever extended to individuals worth several hundred million dollars, California would be “in his rearview mirror.” These are striking admissions, but they illuminate the nature of the opposition more than they undermine the case for the tax itself.
The factual record, as assessed by California’s own nonpartisan Legislative Analyst’s Office, tells a more measured story than Schiffer’s apocalyptic framing suggests. Yes, the office acknowledged that some billionaires may choose to leave the state in response to the tax, taking their income tax contributions with them — a behavioral response it estimates could reduce annual state income tax revenue by under $1 billion. But that figure must be weighed against the other side of the ledger: the wealth tax itself would temporarily generate tens of billions of dollars over several years. The arithmetic is not ambiguous. Even accounting for some degree of flight, the policy produces a substantial net gain for the state, and that revenue can fund the public goods — education, healthcare, housing, environmental protection — that California’s working population actually depends on. The claim that taxing billionaires will devastate ordinary workers gets the causality backwards; it is the chronic underfunding of public services, sustained partly by the political power of concentrated wealth, that has done far more damage to working Californians.
It is also worth examining what the “double taxation” argument actually means in practice, since Schiffer invokes it as though it settles the matter. The contention is that billionaires have already paid income tax on the earnings that became their wealth, and therefore taxing the accumulated stock of that wealth is inherently unjust. But this framing ignores the enormous role that unrealized capital gains play in extreme wealth accumulation — gains that are never taxed as income precisely because the assets are never sold. Much of what sits inside a billionaire’s net worth has never been taxed at all, or has been taxed at the preferential rates that apply to investment income rather than wages. A wealth tax corrects for this structural asymmetry, one that has allowed extraordinary fortunes to compound across decades while the effective tax burden on the ultra-wealthy has remained, by most measures, lower than that borne by middle-income earners as a share of their economic capacity.
Proposition 40 has earned the endorsement of the California Democratic Party, though it has drawn opposition from Governor Gavin Newsom and, in a rare moment of cross-partisan alignment, from Republican gubernatorial candidate Steve Hilton. That Newsom opposes the measure is a legitimate point of scrutiny — progressive voters have good reason to ask whether his objections reflect principled economic analysis or the gravitational pull that donor relationships exert on even well-intentioned politicians. Hilton’s opposition, meanwhile, is entirely predictable and carries no particular analytical weight; his concern that the tax would “add further pressure to the state’s economy” is the standard refrain of supply-side thinking, a framework that has consistently overstated the sensitivity of investment and job creation to top-end taxation and understated the economic multiplier effects of public spending. Neither objection changes the fundamental calculus.
The deeper implication of this debate is about what kind of society California chooses to be. A state that cannot ask its billionaires — a class of people whose wealth, in many cases, exceeds the GDP of small nations — to contribute a one-time levy of 5% of their net worth is a state that has effectively ceded its fiscal sovereignty to those at the very top of the wealth distribution. The threat of exit is real in a narrow sense: some billionaires will leave, and that is a cost worth taking seriously. But accepting that threat as a veto over democratic tax policy means accepting that extreme wealth concentration is beyond the reach of collective governance. That is not a neutral position. It is a choice — and it is the wrong one.