Michael D. Farren

Full Letter: 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. List of signatories: antiwealthtax.com/

Ahead of Tuesday's vote, I put together a group of economists including Nobel Laureates, fmr senior govt officials & academic economists who oppose the California wealth tax and signed this letter: "Economists Against The California Wealth Tax (Prop. 40)" antiwealthtax.com/

My @HooverInst colleague @joshrauh brilliantly debates @gabriel_zucman on the California Prop 40 wealth tax with @andrewrsorkin @JoeSquawk @BeckyQuick “Golden State or Golden Exit? Experts debate the California wealth tax” via @CNBC cnbc.com/video/2026/10/28/go…