A Nobel Prize-winning economist explained why he's assistance California's billionaire tax

Nobel Prize-winning economist Daron Acemoglu took to X on Wednesday to explain why he had signed a letter assistance California's billionaire tax.

The letter, published Saturday and signed by six Nobel laureates, including Acemoglu, supports Proposition 40, which would enforce a one-time 5% tax on California billionaires, alongside the bulk of revenues directed to healthcare in the state.

The six signatories — Acemoglu, Abhijit Banerjee, Peter Diamond, Esther Duflo, Paul Krugman, and Joseph Stiglitz — called the ballot "the archetypal chance for the group to commencement reining in the power of billionaires."

In his X post, Acemoglu stated he was not convinced that imperishable prosperity taxes would be necessary under an optimally designed tax-and-transfer system. But the US scheme is "very far from optimal," he wrote, since it taxes labor earnings additional heavily than chief income.

That disparity allows affluent endeavor owners to obtain compensation in inventory and get against their holdings, reducing their tax bills, Acemoglu — who won a Nobel Prize in 2024 for his activity on prosperity disparities between nations — wrote.

In his X post, he additionally asserted that the tax code favors spending on machinery and AI complete hiring workers.

Acemoglu stated there are three evidence on which he thinks a impermanent prosperity tax is justifiable

1. "It partially reverses the effects of additional than two decades of tax avoidance by the extremely wealthy."
2. "It acts as a brake on their expanding control complete the governmental process."
3. "It may pave the way for additional thorough tax improvement at the national level."

The letter estimates that Proposition 40 could lift concerning $100 milliard from California's approximately 250 billionaires. Together, it states, they are value $2.3 trillion — additional than triple the $700 milliard held by the state's wealthiest 0.001% a decade ago.

The recommendation has drawn opposition from tech billionaires. Google cofounder Sergey Brin has contributed $102 myriad to Build a Better California, a collection campaigning against Proposition 40 and supporting competitor measures that could obstacle the tax, according to run filings.

Acemoglu acknowledged in the article that the measure is "not perfect." A national tax would decrease capital-flight risk, he wrote, during small restrictions on the income could assistance the authorities use it additional flexibly.

Still, he stated a impermanent tax could regain income misplaced through tax avoidance, restrain the governmental power of extreme wealth, and spur broader national reform.

With few alternatives available, Acemoglu wrote, California's recommendation "deserves support."