00:00California is in the midst of a huge battle over its richest residents.
00:04The local health care union did the math on Donald Trump's one big beautiful bill and
00:09concluded it would open up a $150 billion hole in the state's health care budget over
00:14the next 10 years.
00:16To avoid disaster, it proposed a one-time 5% tax on the total assets of residents worth
00:22$1.1 billion or more.
00:24And then all hell broke loose.
00:26Tech luminaries like Google co-founders Larry Page and Sergey Brin began frantically moving
00:31out of the state.
00:32David Sachs, the White House's artificial intelligence and crypto czar, called it not
00:37a tax, but an asset seizure.
00:39Local business leaders, including some of the billionaires leaving town, have funneled
00:43money into super PACs to defeat the idea.
00:46Even Governor Gavin Newsom, a potential 2028 presidential candidate, came out against the
00:51proposal when I interviewed him here at Bloomberg's San Francisco office.
00:56You would have a windfall one time.
00:59And then over the years, you would see a significant reduction in taxes because taxpayers will move.
01:08And that is what I fear at a state level, at a state level.
01:12Many tax experts agree that local wealth taxes are a bad idea.
01:16Wealthy people are simply too mobile and can just leave town.
01:20But we've known for a long time that the tax code is unfair.
01:23Often, the super rich avoid taxes by never selling their sizable investments and instead
01:28just borrow against them, allowing them to pass their estates largely tax-free onto their heirs.
01:34Solving America's budget problems while addressing its sizable debt will most likely
01:38have to start in Washington, not state capitals.
01:42We'll read more about this in the March issue of Bloomberg Businessweek.
01:45We'll read more about this in the March issue of Bloomberg Businessweek.
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