Why “Tax the Rich” is such a dangerous political slogan

California now has a proposed ballot initiative that would impose a one-time tax of up to 5% on certain billionaires and trusts. It’s not law today, but the proposal is real.

People love to make fun of Ayn Rand (and yes, she had plenty of wild takes) but Atlas Shrugged got one thing right:

You cannot build a sound system around extracting more and more from the people who produce the most.

In California, the tax base is already incredibly concentrated. The top 1% of income earners pay nearly half of the state’s personal income tax.

So what happens when the answer to every budget problem is to go after the rich again?

Eventually, they leave.

And when a state becomes heavily dependent on a very small number of high earners, that is not just a political risk. It is a fiscal risk.

America once had no income tax. Then it had a modest one aimed at a narrow slice of high earners. Over time, the tax base widened and the logic expanded.

That’s why I don’t take seriously the argument that this will only affect billionaires.

Maybe at first.

But tax thresholds have a habit of moving.