Nobel-Winning Economists Say California Billionaire Tax Could Be ‘Turning Point in the Battle Between Democracy and Oligarchy’

As California voters head to the polls this November, their vote on whether to enact a first-of-its-kind billionaire wealth tax may mark "a turning point in the battle between democracy and oligarchy," says a group of Nobel Prize-winning economists.

The fight over Proposition 40—a ballot measure that would impose a one-time 5% tax on the net worth of those with $1 billion or more in order to fund the state's healthcare system—has heated up in recent weeks.

The initiative remains popular, with 52% of voters in the state supporting it, according to a poll out last week. But California's elite have lined up at least $156 million behind an aggressive campaign to kill it, with Google co-founder Sergey Brin alone giving at least $102 million.

And while the proposal has strong backing from progressive politicians and labor unions, some prominent Democrats have tried to stop it, most notably Gov. Gavin Newsom.

As the rich flood the airwaves with ads warning that taxing their wealth would bring about economic ruin, six Nobel laureates, all of whom have won the prestigious prize for their work in economics, signed an open letter on Saturday endorsing Prop. 40.

They are inequality scholar Daron Acemoglu, global poverty researcher Abhijit Banerjee, labor and public finance economist Peter Diamond, anti-poverty economist Esther Duflo, trade economist and columnist Paul Krugman, and inequality and globalization economist Joseph Stiglitz.

"Proposition 40 would be the first-ever tax on billionaire wealth enacted anywhere in the world," the economists wrote. "California is the right place to take this historic step."

They explained that the growing number of billionaires in the state in recent decades has helped to make California "one of the most unequal places in America." While the state's richest 0.001% of residents were worth a combined $700 billion a decade ago, its 250 billionaires are now worth about $2.3 trillion—equivalent to the entire annual income of the state's 20 million taxpayers.

"This extreme wealth has translated into extraordinary power," the economists wrote, citing data showing that during the 2024 election, billionaires accounted for 19% of all federal election spending in the US and that these same billionaires are now marshaling huge sums of money to oppose a tax that would affect them.

While acknowledging that many of California's wealthiest have "made important contributions, for which they have been amply rewarded," the researchers noted their use of loopholes in the tax system to effectively pay a lower tax rate than the average Californian.

Most billionaire wealth is held in the form of stocks and other assets whose gains are not generally subject to income tax until they are sold.

As a result, billionaires in the state paid about $3 billion in state income taxes per year from 2019-25, while their fortunes increased by about $1.4 trillion over the period. Dividing total state income tax by that increase equals roughly 1.6%. Meanwhile, the average California family pays about 5-6% of their annual income in state income taxes.

The economists argued that enacting a wealth tax would allow the state to play "catch-up," raising about $100 billion—enough to offset federal cuts to the state's Medicaid program enacted in the Republican budget legislation last year, which have helped to fuel thousands of layoffs at hospitals around the state.

They also disputed a common counterargument that the tax will spur billionaire flight from the state and "doom" Silicon Valley.

Not only would the tax apply to any billionaire living in the state as of January 1, 2026, meaning most would not have had time to relocate; they also pointed out that in 2026, after Prop. 40 was announced, California has attracted 80% of the nation's venture capital funding, compared to just 50% prior to 2025, according to data from PitchBook's Venture Monitor.

“What will allow California to thrive in the future," the economists said, "is not letting a handful of billionaires live tax-free: It is adequate public spending on health, education, and public infrastructure, key engines of economic growth to which it is only fair to ask the ultrawealthy to contribute.”

They added that passing Prop. 40 "isn’t just critical for Californians," but could "kickstart a movement to tax ultra-high-net-worth individuals in other states—and eventually at the federal level and in other countries."

The six Nobel laureates who signed Saturday's letter are not the first prominent economists to publicly advocate for the wealth tax. University of California, Berkeley economist Emmanuel Saez helped draft the proposal, while Gabriel Zucman, a chaired professor at the Paris School of Economics, has conducted research underpinning it. Paris School professor Thomas Piketty and former US Labor Secretary Robert Reich have also come out in support of the ballot initiative.

Responding to the letter from the Nobel laureates, Dutch historian and wealth tax advocate Rutger Bregman—whose School for Moral Ambition has worked alongside Zucman to promote similar initiatives around the world—said it was "really great to see" more celebrated economists speaking up in favor of the proposal.

"You don't have to be a radical leftist to see why it's a good idea," Bregman wrote on social media. "This is not going to be some kind of socialist revolution. The proposal is about restoring balance to a mixed economy. You could even argue it's about saving capitalism itself from oligarchs like Sergey Brin. I think that's exactly why Nobel Prize-winning economists are coming out in favor of this tax."