Joseph C. Sternberg, writing in yesterday's Wall Street Journal, seems to think that California State Proposition 40, which appears on California's November 3rd ballot, is actually "French" in its origins. Frankly, I don't really get that alleged "French Connection," but I do understand that Sternberg thinks that Proposition 40 is a "dog," to quote him on the subject. Here's a link to Sternberg's opinion piece.
Despite what Sternberg has to say, I am planning to vote "Yes" on Proposition 40 (and since I believe in "voting early," I am actually planning to turn in my ballot later today, as part of a "NO KINGS" rally being held at 10:00 o'clock this morning, down at the Santa Cruz County Governmental Center, 701 Ocean Street in Santa Cruz. I am pretty familiar with the location, since I worked there for twenty years, from 1975 to 1995.
Here is why Sternberg thinks that Proposition 40 is a "dog" (emphasis added):
Proposition 40 has a good claim to be the most significant item on the ballot anywhere in America this cycle. That’s only partly due to the fiscal math and the economics of the proposed 5% tax on those with assets above $1 billion. On the merits, the policy is a dog.
As dangerous is the attitude Proposition 40 embodies. Its premise is that any and all private wealth constitutes an illegitimate diversion of resources away from the state. Despite the initial application to fortunes only above $1 billion, one discerns in the academic literature behind Proposition 40 no limiting principle.
This is foreign to America’s political tradition, in which property rights are a foundation of our liberty. The tax is entirely redistributive and punitive, and in this regard its philosophical radicalness is underappreciated. Probably because the danger it poses to the economy is so distracting.
I do not think that the premise underlying Proposition 40's proposed one-time tax on billionaires is that "all private wealth constitutes an illegitimate diversion of resources away from the state." I think that the premise is that "we're all in this together," and that everyone in our society helps create both individual and societal wealth, and that it's both appropriate and fair - not to mention necessary - to make sure, when we face very difficult challenges, that those at the very highest income levels contribute fairly to our ability to deal with our rather daunting problems.
If you think that Proposition 40 treats billionaires unfairly, please consider the following, from The National Bureau of Economic Research (emphasis added):
We estimate income and taxes for the wealthiest group of US households by matching Forbes 400 data to the individual, business, estate, and gift tax returns of the corresponding group in 2010–2020. In our benchmark estimate, the total effective tax rate—all taxes paid relative to economic income—of the top 0.0002% (approximately the “top 400”) averaged 24% in 2018–2020 compared with 30% for the full population and 45% for top labor income earners. This lower total effective tax rate on the wealthiest is substantially driven by low taxable individual income relative to economic income. First, the C-corporations owned by the wealthiest distributed relatively little in dividends, limiting their individual income tax unless they sell their stocks. Second, top-owned passthrough businesses reported negative taxable income on average in spite of positive book income, further limiting their individual income tax. The top-400 effective tax rate fell from 30% in 2010–2017 to 24% in 2018–2020, explained both by a smaller share of business income being taxed and by that income being subject to lower tax rates. Estate and gift taxes contributed relatively little to their effective tax rate. Top-400 decedents paid 0.8% of their wealth in estate tax when married and 7% when single. Annual charitable contributions equalled 0.6% of wealth and 11% of economic income in 2018–20.
Do you remember that Sherlock Holmes story about "The Dog That Did Not Bark"? Sternberg calls Proposition 40 a "dog." But, in this case, it turns out that the dog isn't barking because there really isn't much to bark about. There isn't anything too unfair about trying to have the billionaires pay something, by way of taxes, that might come close to what the typical labor income earner is paying. You know, someone like me or you!
https://www.wsj.com/opinion/the-california-wealth-tax-french-connection-86d1fb82
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