You know that California has a wealth tax on the ballot: Proposition 40. In The Wall Street Journal, Joseph C. Sternberg rips into the proposal, explaining, “On the merits, the policy is a dog. As dangerous is the attitude Proposition 40 embodies. Its premise is that any and all private wealth constitutes an illegitimate diversion of resources away from the state. Despite the initial application to fortunes only above $1 billion, one discerns in the academic literature behind Proposition 40 no limiting principle.”
There’s a lot in that paragraph to digest. Sternberg has deftly cut to the heart of multiple problems facing Californians should they pass Prop 40.
First, the idea that the state owns your wealth and can take it at any time is anathema to the idea of capitalism. Wealth taxes are a de facto sideways claim by the state on the means of production. In 1867, Karl Marx explained in Capital how the centralization of the means of production would destroy capitalism, writing, “Centralization of the means of production and socialization of labor at last reach a point where they become incompatible with their capitalist integument. Thus integument is burst asunder. The knell of capitalist private property sounds.” Giving credence to the idea that all wealth is owned by the state is the first step in Marx’s plan.
The second issue highlighted by Sternberg in that short paragraph is that despite initially applying only to billionaires (aka, America’s most productive citizens), there is no shield in Proposition 40 to prevent California’s legislature from lowering the threshold to encompass more Californians. At the federal level, the income tax thresholds have been lowered a number of times, including after both World Wars (War Revenue Act of 1917, Victory Tax), during the Vietnam War (Revenue Act of 1964), and later by the Economic Recovery Tax Act of 1981, and via inflation creep (especially during the 1970s) until the brackets were indexed in 1985. Such instances have happened at the state level as well.
Action Line: So Californians have a choice to make. Will they support the idea that the state owns all wealth, and put their own wealth up for grabs? Or, will they defeat Prop 40 and protect the fundamentals of capitalism in California? Click here to subscribe to my free monthly Survive & Thrive letter.
