I’ve written plenty about why wealth taxes are economically destructive, administratively nightmarish, and unlikely to achieve anything close to what their advocates promise. But Zucman’s prescription is wrong for a more fundamental reason, as his (and my) native country shows: Raising taxes to fuel ever-larger demands for government spending is a recipe for disaster.
Unsurprisingly, Zucman is unhappy about an analysis of the tax’s likely effect by Hoover Institution economists Joshua Rauh and Benjamin Jaros. Proposition 40’s proponents claim that the tax will raise $100 billion. Rauh and Jaros argue that, far from raising that sum, such a tax would end up costing the state tens of billions of dollars. To put it simply (and before considering other negative consequences), that is because the tax would drive billionaires (and the taxes they pay) out of the state. According to the Wall Street Journal, it is already doing so:
Seven billionaires with $539.9 billion in wealth moved out of California between the initiative’s filing last autumn and the date at which residency would be determined for purposes of assessing the tax (Jan. 1, 2026), according to public reports. That means nearly 30% of Prop. 40’s estimated $1.9 trillion potential tax base has already disappeared.
This has not stopped Zucman from claiming that California’s billionaires will stay put. Included in a series of tweets he has written attacking the Hoover duo’s paper was this:
Why would billionaires permanently leave California in response to a one-time tax owed if they lived there on January 1, 2026? It would only make sense for them to leave if the tax becomes annual.
That’s (a bit) like saying that people who have already been burgled have no reason to lock the door to their homes.
Here are Arnold Kling’s thoughts on today’s rioting in France.
The most obvious answer to France’s problems is economic growth — much easier said than done, of course. The reason that’s so hard for France isn’t because the government is “unresponsive” to the people and their concerns, it’s because it’s too responsive. For decades, the French have demanded the economic policies that got them into this mess, and the government appeased them.
GMU alums Phil Magness and Dave Hebert expose the weakness of arguments for industrial policy.
This extended period of protectionist infancy suggests that the argument needs a new name. We propose the “Peter Pan industry argument” for companies that never grow up because tariffs make sure they never have to.
The question tariff advocates rarely ask is: Why do some American producers have higher costs than foreign rivals even in the face of lower-cost foreign competition? The answer comes down to specific rules and choices within particular firms and industries. Tariffs, and protectionism in general, address none of these. No industry illustrates this like steel, but it is far from the only one.
Scott Lincicome, sharing news from to an Axios report, tweets:
toldja: “the [manufacturing] recovery is being powered by industries at the forefront of the AI and energy boom while the traditional factory sector gets left behind”
The growing mfg industries are ALSO among the least tariff-protected.
But the political movement to slow down or block the growth of data centers could have adverse consequences for the entire economy. By some estimates, AI-related goods accounted for as much as three-quarters of all global trade growth in the first quarter of 2026 and upward of a third of U.S. economic growth.
Financial risk does not diminish the structural utility of technological advances. Many railroads failed, but the track remained. Ditto for companies in the 1990s that laid fiber-optic cable, which continues to generate value.
If CoreWeave has borrowed too much, creditors and shareholders will bear the consequences. If Microsoft or Meta wants another gigawatt of electricity, they should pay the cost of producing and transmitting it. But neither investors nor consumers benefit when zoning boards, permitting regimes and utility bottlenecks prevent otherwise economically viable projects from being built.
David Henderson recounts a tale told by his late professor, George Hilton.
