California Is Chasing Wealth That Has Toes

The Center for Land Economics full report may be discovered here; our op-ed on the identical argument ran within the San Francisco Chronicle yesterday.

Last week California certified a Billionaire Wealth Tax for the November poll: a 5 % one-time levy on the state’s billionaires, paid out over 5 years, to boost about $20 billion a 12 months for well being care, meals assist, and colleges after federal cuts. We perceive the impulse. The state has a proceeds gap, and billionaires can afford to assist fill it.

But the tax will fail on the factor it’s for, and it’ll fail for a easy purpose: billionaires, not like land, have toes.

We simply spent months constructing the empirical case, calculating the mixture of California’s land values, in a new report from the Center for Land Economics. The brief model: land is likely one of the largest swimming pools of wealth there may be, California has extra of it than nearly the rest, and it can’t go away the state.

We estimated the overall worth of California’s land, summing it up parcel by parcel: about $8.14 trillion. We checked that determine two extra methods — towards federal housing-finance knowledge and towards time-trended gross sales — and all three strategies land in the identical vary. It is, so far as we all know, the primary credible bottom-up estimate of what California’s land is definitely price.

That quantity is roughly eight occasions the billionaire wealth the state can nonetheless realistically tax. Los Angeles County’s land alone is price greater than your complete billionaire base the wealth tax is chasing. The Bay Area’s is shut behind.

And land is the uncommon tax base that simply sits there. A billionaire can transfer to Austin. While their portfolio can transfer in a day, their land can’t.

The wealth tax’s personal math assumes a $2 trillion base, which is a virtually 2x overestimate as a consequence of wealth flight.

Six California billionaires — Larry Page, Sergey Brin, Peter Thiel, Don Hankey, Travis Kalanick, and Steven Spielberg, price roughly $540 billion mixed — had already moved their tax residency out of state earlier than the measure’s January 1, 2026 cutoff. Mark Zuckerberg (about $220 billion) adopted in early 2026 and can nearly actually combat the retroactive attain in courtroom. Add a roughly $200 billion overestimate that different economists have flagged within the proposal’s personal mannequin, and almost half the assumed base is gone.

To nonetheless increase its $20 billion towards what’s left, the speed must climb from 1 % towards 1.6 or 1.9 % relying if Zuckerberg prevails in courtroom, which solely provides the billionaires who stayed another reason to observe their neighbors out. This is the lure with taxing a small variety of cell individuals: increase the speed to chase those who left, and also you push out those who remained.

Here is the comparability that ought to reframe the entire debate.

A land worth tax of simply 0.25 % would increase the identical $20 billion a 12 months the wealth tax guarantees on a base eight occasions bigger, that grows with California’s marketplace as a substitute of fleeing it, and that can’t transfer. (Go larger and the maths nonetheless holds: a price of about 1 % would cowl California’s whole $87 billion well being and human companies funds, in perpetuity.)

A land worth tax is simply an atypical property tax with one change: it falls solely on the worth of the land and never the buildings on it. The land worth tax can’t be dodged by leaving nor can or not it’s handed on to renters. Meanwhile, it captures the windfall the general public itself creates: when the state builds a transit line, the encircling land will get extra useful, and the tax returns a part of that to the individuals who paid for it.

Because land worth is wildly concentrated, the burden lands hardest on the prime coastal tons and downtown blocks owned by these with probably the most, and barely touches a working household’s home within the Central Valley. It reaches the rich with out having to chase them.

None of that is actually about billionaires; California reaches for unique taxes as a result of its regular one has been damaged since 1978.

Proposition 13 capped property taxes and froze assessed values till a property sells, so a long-tenured proprietor pays a small fraction of what the younger household subsequent door owes on an equivalent home. We estimate California now assesses property at someplace between 44 and 60 % of what it’s really price. In different phrases, the state has quietly chosen to not acquire on roughly half its personal real-estate base. As property proceeds fell, revenue taxes rose to fill the hole, which is how California ended up with the best revenue tax price within the nation and a proceeds base that walks out the door every time it’s squeezed. The wealth tax is probably the most determined squeeze but, and it does nothing to restore the bottom beneath.

The identical mistake is being made all over the place. Land worth taxation is about as shut as economics will get to a free lunch, but from Florida to California, they’re ignoring it.

Florida is making an attempt to abolish its property tax; critics estimate the misplaced proceeds must be made up by roughly doubling the state gross sales tax, buying and selling the one tax that doesn’t distort the marketplace for one which taxes each buy working households make. California goes the opposite approach, layering a brand-new tax on cell billionaire wealth on prime of an already-broken property tax. Both ought to look as a substitute to the tax base sitting proper underneath their toes.

The wealth California can really tax is the bottom itself: steady, monumental, made useful by all of us, and incapable of transferring to Miami.

Greg Miller and Lars Doucet are co-founders of the Center for Land Economics.