Tax Prof Masterminds of California Wealth Tax Bet Their Moment Has Arrived

Bloomberg, Tax-the-Rich Masterminds Bet Their Moment Has Finally Arrived:

When Senator Elizabeth Warren ran for president in 2020, she suggested making America’s richest households pay a tax on their wealth. David Gamage was one of the people called in to work on it.

Gamage, a University of Missouri tax law professor who worked in the Treasury Department under President Barack Obama, was asked to help tailor a proposal and then a bill that could survive legal challenges. But Warren’s White House bid fell short, and her tax idea didn’t make it out of committee even though Democrats controlled Congress at the time (she has since reintroduced the legislation).

In spite of that, the unassuming Gamage became something of a guru. After Warren’s effort failed, he started hearing from politicians and activists across the US who wanted to tax wealth. Most of the queries he put aside. But at the urging of fellow law professor Darien Shanske, Gamage reconsidered a pitch from SEIU-UHW, a labor union looking for a way to tax California’s billionaires.

Shanske, of the University of California at Davis, had consulted for the union in the past. SEIU-UHW’s leader, Dave Regan, was known for battling to push through ballot initiatives in California. Shanske was confident Regan could deliver.

The result is one of the most controversial efforts yet to make the wealthy pay more tax. California has more billionaires than any other state, and Gamage, Shanske and two other academics, including UC Berkeley economist Emmanuel Saez, have written a first-of-its-kind proposal that will go before the state’s voters on Nov. 3. Called Proposition 40, it would levy a one-time tax of 5% on the assets of Californians whose net worth tops $1 billion.

“If Prop. 40 passes and is viewed as successful, a lot of other states and the federal level will be looking to do something similar,” Gamage said in an interview. …

The threat of the tax is reverberating through corporate boardrooms and the private lives of some of the world’s richest people. … “At the end of the day, he did not go anywhere, and I think that’s going to be the story for other billionaires,” Brian Galle, a Berkeley law professor and former Securities and Exchange Commission senior fellow who helped design Proposition 40, said of Zuckerberg’s decision to stay. …

Saez and Gamage drafted the 14-page Proposition 40 with Galle and Shanske, the UC Davis law professor and former Sidley Austin public finance attorney. All four worked on Warren’s wealth tax and other similar efforts in California, New York and Washington state that fell short. …

Miles from Berkeley, another group of academics at Stanford University’s right-leaning Hoover Institution have been picking apart Proposition 40. They say the tax won’t raise as much as promised. Hoover economists Joshua Rauh and Benjamin Jaros said that the architects of the tax are relying on best-case scenarios. Rauh and Jaros said that they have been exploring a fuller range of outcomes and acknowledging uncertainty about how the measure will work. … They estimate the tax will collect only $30 billion, far less than the $100 billion projected by its backers. Rauh and Jaros also estimate the one-time levy will ultimately produce a net loss of $38.9 billion by spurring enough departures for income-tax loss to outweigh revenue raised. [The Net Present Value of the California Billionaire Tax Act (NBER 35899 Oct. 2026)]

Proposition 40’s architects haven’t shrunk from such debates. In March, the four researchers published a rebuttal to Jaros and Rauh, arguing genuine residency changes are limited and that related revenue losses would be “almost negligible” because they pay little income tax relative to their wealth [Brian Galle (UC-Berkeley), David Gamage (Missouri), Emmanuel Saez (UC Berkeley) & Darien Shanske (UC Davis), Response to “The Net Present Value of the Billionaire Tax Act”]. Team members have published at least five other papers explaining the measure or responding to critics since January. Gamage has called some criticism “bald-faced lies,” while Galle has accused detractors of “repeating the same nonsense over and over again.”

The Hoover researchers said Saez in particular is wading too deeply into politics, part of what they see as a broader trend among economists. Jaros said deciding if billionaires should pay more taxes isn’t the job of an academic.

“That’s a political question,” Jaros said. “That goes back to early parts of the profession: Is an economist a policy adviser, or are they a policy maker?”

Wall Street Journal, The Four Academics Who Dreamed Up California’s Billionaire Tax:

The proposed California wealth tax has galvanized a host of billionaires who have lined up to fight it. On the other side lies a group of less obvious power brokers: the four professors who drafted the ballot measure.

The group is made up of three professors at the University of California: Berkeley economist Emmanuel Saez and law professors Brian Galle and Darien Shanske, at Berkeley and Davis, respectively. The fourth is tax scholar David Gamage at the University of Missouri’s law school. …

Animating the quartet’s body of work together is the idea that the taxation system is poorly adapted to the way that today’s top sliver of Americans accumulate wealth, contributing to soaring inequality. While the tax system is fairly effective at collecting revenue from wage earners, it allows massive wealth to amass outside the income tax system.

All four broadly believe in wealth taxes as a means to help address inequality, though they don’t all necessarily identify as liberal. Shanske, citing his belief in markets and efficiency, said he would have been considered fiscally conservative at another time in American history. …

Democratic Vermont state Rep. Emilie Kornheiser, who consulted with several of the group on technical matters while drafting a wealth tax bill several years ago, described them as a counterweight to the right-leaning tax groups and lobbyists who regularly connect with state legislators through sponsorship of events like meetings of the National Conference of State Legislatures. The professors have far fewer resources to make their case, she said.

“At the end of the day, they are nerdy academics,” Kornheiser said, describing them as consultative and practical.