USC and UC Berkeley economists debated Tuesday at USC’s Michelson Hall over whether Proposition 40 would raise billions for healthcare or ultimately cost California tax revenue by driving its wealthiest residents out of the state.
California Proposition 40 would create a one-time tax on billionaires equal to 5% of their wealth. The tax would apply to billionaires who were California residents as of Jan. 1, 2026, and would be due in 2027. Under the proposition, the tax revenue would primarily support medical and other health care services, public education and food assistance programs.
The debate featured Matthew E. Kahn, provost professor of economics and spatial sciences at the USC Dornsife College of Letters, Arts and Sciences, and Emmanuel Saez, the chancellor’s professor of tax policy and public finance at the University of California, Berkeley.
“My opponents say that if we tax billionaires more, they are going to get upset, leave, and this is going to hurt California’s economy,” Saez said to Annenberg Media.
However, he does not believe these billionaires will leave because California is home to several tech giants.
“The AI boom we are seeing, and the wealth of billionaires has increased so much, that the tax we are asking them to pay, which is 5% over five years, is just minuscule relative to the enormous wealth gains they can make,” Saez said.
On the contrary, Kahn said to Annenberg Media, “My opposition is the dangerous precedent that Sacramento gets the sense it can start tapping into the very rich,” said Kahn. “They’re going to keep raising taxes and coming back to the well. And I worry that ambitious people thinking of moving to California and starting their firms will move elsewhere.”
“With the money, I’m not convinced this is the best use of the money,” he said. “If this is really about helping poor people, I’m not convinced this is the best way to help poor people. There are more cost-effective ways to help poor people than these subsidies for Cal Medicaid.”
Students like Cecile Reiner, a sophomore economics major at USC, weighed in on the situation.
“I think it makes sense that the billionaires aren’t paying taxes, and I’m very pro-redistribution,” she said.
Initially, Reiner thought the proposition was very efficient, which is why she supported the bill.
After hearing Kahn’s perspective, Reiner said, “I hadn’t considered how the money would be spent, and I think I’m not a big fan.”
Nick Li, a graduate of USC’s econometrics master’s program who attended the debate, said he’s skeptical of the proposition.
“What happens if the government wants to collect some other things from the ordinary people who have lower bargaining power?” Li said. “The billionaire is actually a shield for ordinary people.”
Polls for California Proposition 40 close at 8 p.m. PDT on Tuesday, Nov. 3. Initial results are expected shortly afterward, though the final count could take several weeks.
Edited by Ally Nakamura and Jadon Frank