Often I’m asked whether California could levy a wealth tax on individuals. My answer is that, absent persistent political pressure by taxpayer advocates, the political door in California is always open to all forms of tax increases, including a wealth tax. When the questioner follows up by asking whether such a tax would be constitutional, I respond that I don’t know but I wouldn’t count on courts to stop it, and that was before a US Supreme Court decision earlier this week that seems to leave the legal door open to a wealth tax.
Almost as often I’m asked if a ballot measure could protect taxpayers. My answer is “No.” Even when tax limitation measures become law (eg, Proposition 13 in 1978), lawmakers always find new paths to taxation (California has consistently boosted income tax rates since property taxes were limited by Proposition 13), state courts in California dependent on the governor and legislature for their budgets are not immune to political pressure (last week the California Supreme Court removed a tax limitation measure from the ballot after vigorous opposition by the governor and legislative leaders), and no ballot measure could protect against every form of taxation (even if enacted into law that tax limitation measure could not prevent another tax increase like the 2012 measure that lifted the top individual tax rate nearly 30 percent).
That’s why GFC chooses to place persistent political pressure on elected officials to restrain spending, especially on the public sector unions that collect the lion’s share of state, local, school and agency spending. Absent spending restraint, there will always be pressure for more revenue. Our task in that regard became more difficult under Governor Newsom, who has been the friendliest governor towards public sector unions since Gray Davis, which is why we are turning more attention to the 2026 race to take his place. But spending restraint alone isn’t enough to prevent tax increases. That’s because there will always be special interests with access to the ballot. That’s what happened in 2022 when Lyft proposed a tax increase by ballot measure against which GFC led the successful opposition. We expect others to try, maybe even with the help of some elected officials. Be prepared.
