“The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”
– Henry Hazlitt, Economics in One Lesson (1946)
The Golden Fleece
Have you come across California’s latest misguided economic pursuit? Once again, the Golden State seems to be finding new and unusual ways to transform prosperity into misfortune.
If you’ve missed the recent news, the 2026 California Billionaire Tax Act (Initiative No. 25-0024) is making waves. Launched by the SEIU-United Healthcare Workers West, this proposed measure aims to implement a one-time 5 percent excise tax on the net worth of individuals in the state valued over $1 billion.
The measure promotes itself with a well-intentioned catchphrase: “Eat the rich to save the sick.”
However, this is a typical scenario of a state exploiting its most productive citizens like an endless ATM. It’s also indicative of why California seems to be in a downward spiral.
Advocates of the Act assert that California is teetering on the brink of a fiscal crisis. This claim holds some truth, as Sacramento is grappling with a deficit that fluctuates between $3 billion and $20 billion, influenced by external circumstances.
The situation has worsened with cuts to federal healthcare (Medi-Cal) and food assistance programs, leaving a financial void. Consequently, state officials argue that an emergency tax on billionaires is essential to avert a collapse of California’s healthcare system. Targeting approximately 200 billionaires, proponents estimate a one-time revenue boost of $100 billion.
This proposal may seem appealing at first glance, with claims that 90 percent of the funds will support healthcare. Yet, when it comes to funding in Sacramento, no sum ever seems sufficient for those in power.
We’ve seen a similar pattern before. Temporary taxes often morph into permanent obligations. One-time assessments become recurring fees. In essence, California’s budget crises are not just occasional hiccups; they are a systemic issue characterized by extravagant spending.
Mass Exodus
If Sacramento believes billionaires will simply remain passive while the Asset Seizure Team approaches, they are clearly overlooking the steady stream of moving trucks heading east along the I-10 and I-80 corridors.
California is already witnessing a population decline. In fact, for six consecutive years, the state has recorded a net loss in residents—approximately 216,000 in 2025 alone. Having been born and raised in California and lived there for over four decades, we made our exit in 2022.
The current exodus is not limited to retirees seeking the warmth and affordability of places like Arizona; high-income earners are also leaving. Recent statistics reveal that while low-income individuals depart due to housing expenses, the flight of wealthier residents has accelerated due to unfavorable tax conditions. Since 2019, over 200 significant companies have relocated from the state, including Oracle, Hewlett Packard Enterprise, Charles Schwab, Chevron, and In-N-Out Burgers.
According to industry insiders, between 80 to 90 percent of the individuals this tax intends to target have either established residency elsewhere or are initiating the process before the tax takes effect. Alarmingly, the state is already considering exit tax proposals to penalize wealthy residents when they leave for good.
We are in the midst of a high-stakes game of geographic musical chairs, and the music has already stopped. These affluent billionaires are not merely relocating their families; they are transferring their entire financial legacies to jurisdictions that do not treat them as mere sources of revenue.
When a state views its most successful citizens as an endless resource, those individuals will find ways to remove their wealth from that jurisdiction. By the time tax collectors arrive with their assessment forms, they may find nothing but deserted mansions and “For Sale” signs as the tax base slips away into the Nevada desert.
When a state proposes to take 5 percent of everything someone has built—not just their income, but their literal existence—people do not cheerfully comply; they exit the stage. As they leave, they take with them potential investments, philanthropic efforts, and annual tax contributions.
The Seen and the Unseen
This brings us to the heart of the issue, famously articulated by economist Henry Hazlitt in Economics in One Lesson. Hazlitt pointed out the distinction between the “seen” and the “unseen.”
In this context, the “seen” represents the $100 billion the state anticipates seizing. It includes new clinics, public announcements regarding funded programs, and politicians participating in ribbon-cutting ceremonies. This is what the public perceives, which explains why 60 percent of likely voters currently back the initiative.
The “unseen,” however, encompasses the erosion of capital. To fulfill a 5 percent wealth tax, billionaires do not simply dip into a vault of gold. Their wealth is tied up in productive assets such as stocks, real estate, and venture capital investments.
When Sacramento mandates a forced sale of these assets, it isn’t just taxing individuals; it is depleting the very enterprises that bolster California’s economy.
This liquidation initiates a chain reaction of declining stock values and stalled innovations that never materialize. The thousands of jobs that could have been created and the technological and medical breakthroughs that might have occurred are obscured, as the seed money is redirected to sustain governmental expenditures.
When billionaires pay their dues to Sacramento, each dollar is a dollar not invested in new startups, housing projects, or advancements in medical technology. Moreover, when a billionaire departs, the state loses not just the 5 percent, but also the annual 13.3 percent top marginal income tax rate and capital gains taxes they would have contributed.
In fixating solely on the “seen” (the immediate cash influx), Sacramento neglects the “unseen”—the gradual degradation of the state’s capital framework.
California and The Art of Economic Suicide
California already possesses the most progressive tax structure among industrialized nations. The top 1 percent of earners contribute nearly half of the state’s income tax revenue.
By imposing a wealth tax on billionaires, California risks damaging the very branch it sits upon. Should the 200 billionaires choose to leave—and many already are—this tax liability will not vanish; it will merely shift downward.
When state officials eventually realize that the anticipated $100 billion revenue did not mitigate the structural deficit—due to squandering it on new recurring expenditures—they will turn their sights on near-billionaires, then multi-millionaires, and eventually target the upper-middle class.
The 2026 Billionaire Tax Act represents a frantic tactic by a state unprepared to adopt fiscal responsibility. It perceives wealth as a fixed resource to be plundered rather than a dynamic engine propelling the economy.
If this measure passes in November, Sacramento may achieve its $100 billion relief for a short period. However, the unseen repercussions—the lost jobs, absent startups, and the irrevocable departure of the state’s tax base—will plague California long-term.
This scenario ultimately transforms the California Dream into a cautionary tale. By the time the legislature grasps that wealth is mobile and capital flows to jurisdictions where it is valued, the damage will be beyond repair. A stable society cannot rest upon resentment and the seizure of wealth.
As innovation and talent vacate the state, California will find itself burdened with an oversized bureaucracy and deteriorating infrastructure—problems that no emergency measures can resolve. The impact goes beyond taxing the affluent; it’s a taxation of its own future into oblivion.
Regrettably, Governor Gavin Newsom—whose leadership raises serious questions—is currently the leading candidate for the 2028 Democratic presidential nomination. Should voters fall prey to his appealing façade, California’s wealth confiscation strategies may extend to the entire nation.
[Editor’s note: To receive a complimentary copy of an important special report titled, “Cash Machine – Why You Should Own this Mineral Royalty with a 12% Yield,” join the Economic Prism mailing list today. If you’re interested in a special trial offer for MN Gordon’s Wealth Prism Letter, you can access that here.]
Sincerely,
MN Gordon
for Economic Prism
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