Proposed Statewide Wealth Tax Could Have Ruinous Consequences

There’s an old (and true) adage about taxes: the more you tax something, the less of it you get. And there’s another, equally true, that when you find yourself in a hole, the first thing to do is stop digging. Both apply to a misguided and potentially damaging ballot initiative being proposed by labor groups that would raise taxes on California’s highest earners.

Over the past decade, California’s General Fund spending has more than doubled in absolute terms and grown by almost a third per capita. During that same period, the state’s unemployment rate has consistently exceeded the national average, private-sector job growth has lagged, and public-sector employment has expanded more rapidly than the private economy. At the same time, California has seen population decline and slower economic growth, driven in large part by the high cost of living and the exorbitant overall tax burden.

It’s reasonable to ask what Californians are getting in return. Despite tens of billions of dollars spent, homelessness remains stubbornly high. The state’s unemployment insurance system is burdened with significant debt, hitting small businesses especially hard. And recurring reports of inefficiency across major programs have eroded public confidence.

California’s fiscal model also depends heavily on a relatively small number of high-income taxpayers, who contribute more than 40% of General Fund revenues. These taxpayers are central to the state’s innovation economy as founders, investors, and employers. Policies that signal instability or continually raise the cost of staying in California risk discouraging investment, job creation, and long-term commitment to the state – outcomes that would only deepen our fiscal challenges.  And these high earners can choose to leave, taking their taxable dollars with them.

Raising taxes on this group is not a durable solution. California’s real need is to bring spending growth back into alignment with economic reality and to insist on greater accountability and results. That is the approach the Bay Area Council is taking in leading a regional effort to stabilize and invest in our transit systems: pairing new funding with clear expectations around efficiency, service improvements, and operational reform. Californians deserve policies that strengthen confidence, support growth, and put the state on a more sustainable path.