California’s wealth tax doesn’t fix the real problem: Cash-poor billionaires who borrow money, tax-free, to live on

Group 1 - California is considering a one-time 5% tax on total assets for residents worth $1 billion or more, applicable to those residing in the state as of January 1, 2026, with payments due in 2027 and an option to extend over five years [2] - Supporters of the Billionaire Tax Act, including a major healthcare workers' union, aim to raise approximately $100 billion to offset expected federal healthcare cuts and ensure the wealthy contribute their fair share [3] - Governor Gavin Newsom has expressed concerns that the tax could lead to an exodus of high-net-worth individuals from California, despite his support for the state's progressive tax system [3] Group 2 - The proposed tax may not effectively address the financial practices of ultra-wealthy individuals, who often borrow against their assets tax-free, allowing them to maintain a lavish lifestyle without realizing significant taxable income [1] - Examples of high-profile individuals like Elon Musk illustrate that many billionaires do not rely on traditional salaries, instead financing their expenses through loans against their equity holdings [4] - Mr. Beast, a prominent YouTuber, has indicated that he operates with negative cash flow, borrowing money to reinvest in his content, highlighting the financial dynamics of wealth generation among the ultra-rich [5] Group 3 - Palmer Luckey, founder of Anduril, criticized the billionaire tax, arguing that it would force entrepreneurs to sell significant portions of their companies to meet tax obligations, potentially exacerbating existing issues rather than resolving them [6] - The tax has prompted some executives to relocate from California, with notable figures like Larry Page and Sergey Brin severing ties with the state, indicating a trend of high-net-worth individuals seeking more favorable tax environments [6]