How UC Berkeley Professors Campaign for Wealth Taxes

Emmanuel Saez and Gabriel Zucman are two leading voices of academic economic support for California’s ballot measure to impose a billionaire tax (Prop 40). They are regularly engaged in political activism. The academic work they use to justify their policy proposals has received heavy criticism, and their promotion of their work is strongly partisan. They frequently use their research to try to add credibility to California’s billionaire tax and to push for a coordinated international system of wealth taxes that would make wealth tax avoidance nearly impossible.

The problem is not that they are academics aiming to influence policy in general. For better or for worse, academic economists are regularly involved in suggesting, designing, and advocating for policies. The gold standard for academic involvement in policy design, however, is to use widely accepted nonpartisan research to improve policy. The academic economists Emmanuel Saez and Gabriel Zucman, who are promoting the California wealth tax, fall far short of this gold standard.

For one thing, their research is far less settled than they let on. Saez and Zucman, along with their frequent coauthor Thomas Piketty, have received substantial criticism from other economists. The research they are using to justify their policy recommendations is not settled and should not be treated as such by the public.

Their promotion of their research is also firmly partisan. Their proposals have found champions mainly on the ultra-progressive flank of the Democratic Party, most notably Bernie Sanders and Elizabeth Warren, both of whom they advised.

The most strikingly activist aspect of their push for the California wealth tax is that it is merely a launching pad for their grander policy aspirations. Their original plan was not to start with a single state but to pass an annual, national wealth tax in the United States. They were instrumental in drafting proposed national wealth tax policy for both Elizabeth Warren and Bernie Sanders.

By Saez and Zucman’s own projections, had Sanders’ plan been in place since 1982, the fifteen wealthiest Americans would have kept barely a fifth of their 2018 fortunes. Under Warren’s, less than half. Both Warren and Sanders have proposed graduated wealth taxes for wealthy Americans. Warren’s plan called for a 2 percent wealth tax for households with a net worth between $50 million and $1 billion, and 3 percent for households with $1 billion or more; Sanders’ plan called for a 1 percent wealth tax on married households with $32 million or more (or $16 million for single taxpayers) and worked up to an 8 percent wealth tax for married households with a net worth of $10 billion or more (or $5 billion or more for single taxpayers).

After neither of these plans gained national traction, Saez and Zucman turned to Proposition 40, a wealth tax ballot measure in California. California has a large population (and a large population of billionaires), has a significant impact on national policy, and is a solidly blue state. At the same time, they are also pushing international organizations to establish internationally harmonized global wealth taxes.

The California wealth tax is framed as a one-time tax aimed at offsetting a reduction in federal support for healthcare, education, and food assistance. The tax would be applied to billionaires who are California residents as of January 1, 2026 to avoid the threat of billionaires leaving California. The tax will be levied on billionaires based on the assessed value of their net worth on December 31, 2026, even if they migrated out of California before the tax was passed.

In other words, a billionaire who left the state before voters ever weighed in would still have to pay the tax.

However, the claim that the tax will be a one-time tax simply is not credible. Saez and Zucman are still actively pushing for globally coordinated wealth taxes and are researching the viability of a permanent wealth tax in California. Billionaires and centimillionaires should rationally expect the California government to try to repeat or institutionalize some sort of wealth tax measure if the initial tax is successful at raising revenue. All too often, taxes sold as “temporary” have a way of becoming permanent.

Their wealth tax proposals other than the current California ballot measure frequently include measures aimed at stopping the ultra-wealthy from migrating out of jurisdictions with wealth taxes to avoid the tax. Both the Warren and global wealth tax proposals include exit taxes to discourage tax avoidance through migration. The proposed exit tax in the Warren proposal was 40 percent of net worth, a steep toll on the way out the door; and the global wealth tax proposal does not give a specific rate for the proposed exit tax.

Every wealth tax rests on a guess about how much wealth will slip out of reach once the tax arrives. Saez and Zucman’s guesses are strikingly optimistic. The extreme measures that Saez and Zucman propose to restrict tax competition could be the only defensible justification for the low avoidance rate they assume. They assume that Warren’s 2 percent tax would reduce reported wealth by 15 percent (7.5 percent per tax percentage point), and they assume a 10 percent reported wealth reduction for the 5 percent California tax and Sanders tax on billionaires, which assumes just 2 percent per point. Both Penn Wharton and the Tax Foundation use figures around 8 to 9 percent per point of tax, and Kyle Pomerleau uses 13 percent per point. The evidence for these estimates all come from countries with wealth tax rates significantly below five percent, so Saez and Zucman are implicitly assuming that responsiveness per point of tax will drop with a higher tax. There is little, if any, reason to assume that other than the supposed effectiveness of the heavy-handed tactics they want to use to constrain migration to avoid the tax.

The California wealth tax is not a one-time measure, grounded in solid academic research, meant to address an unexpected budget shortfall. It is a testing ground for the viability of broader and more sustained efforts to tax wealth and suppress tax competition, all based on suspect and partisan research. And if it succeeds, California won’t be the last stop.