In the lead-up to the November midterms, the Democratic Socialists of America (DSA) put its support behind Californias Proposition 40, a measure that would impose a one-time 5% tax on billionaires in the state. Although the secretary of state’s election results show it on the path to defeat as of Wednesday afternoon, the DSAs support for the policy has created a flashpoint for larger discussions about socialism’s redistributive aims â and the capital flight critics say could follow.
“In their mind, every tax they do is some attempt to get money from people who create wealth and move it to the state,” Richard Stern, an economics scholar with Advancing American Freedom (AAF), said in an interview with Fox News Digital.
The DSA’s stance on Proposition 40 has also brought it into conflict with other Democratic figures, including Gov. Gavin Newsom, who opposed it.
The proposition would have applied a 5% tax on assets like businesses, securities, art, collectibles and intellectual property while excluding select pensions, real estate and retirement accounts.
To prevent billionaires from simply leaving the state, Proposition 40 was designed to retroactively apply to billionaires who were residents of California on Jan. 1, 2026.
On the website for its California chapter, the group offered a PowerPoint slideshow supporters could use to argue its merits.
“We have the money in California to pay for the quality schools and healthcare that we need. It just needs to be transferred from the wrong pockets to the right ones. We can do that by taxing the rich,” the slideshow reads.
The DSA argued the policy would help cover up to a projected $100 billion shortfall in federal funding for the states Medi-Cal program that provides health insurance for low-income individuals, seniors and people with disabilities. The proposition also outlined that 90% of the generated revenue would go to healthcare while the remaining 10% would be set aside for education, food assistance and administration of the tax.
As part of its argument in favor of the policy, the DSA framed it as a scaled-up version of something that already exists: a progressive tax â a kind of tax that scales relative to income.
“It calls for a temporary 5% wealth tax on just 250 Californians â the very richest people in the state â who together own $2 trillion in wealth,” its materials explain.
“Lets be clear: if the Billionaire Tax passes, none of the billionaires will actually lose money. They have been averaging a growth rate of 7 or 8 percent per year in their wealth. Thus, a 5% hit doesnt even cut into what they have; it just slightly slows down the growth of that wealth.”
But to experts like Stern, the AAF economist, the policy reflects a fundamental misunderstanding of wealth.
“The left looks at a billionaire, and they assume that theyre sitting on $10 billion, $100 billion in cash. I hate to break it to them: Theres no cash,” Stern said.
“They have no idea that were talking about a trillion-dollar company, were talking about a trillion dollars worth of factories and warehouses and delivery trucks and machinery,” he added.
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