Nobel Economists Back California Billionaire Tax; Larsen Opposes

On Sept. 19 six Nobel Prize-winning economists endorsed California’s Proposition 40, a ballot measure that would impose a one-time 5% tax on the state’s roughly 250 billionaires. The measure is scheduled for the Nov. 3 ballot. Ripple Labs executive chair Chris Larsen has donated more than $10 million to committees opposing the proposal.

The letter was signed by Daron Acemoglu, Abhijit Banerjee, Peter Diamond, Esther Duflo, Paul Krugman and Joseph Stiglitz. It said the wealthiest 0.001% of Californians held about $700 billion a decade ago and now hold roughly $2.3 trillion. The economists estimated a one-time 5% levy on those fortunes would raise about $100 billion and noted that this amount is comparable to revenue from a 5% income tax on all California taxpayers. The letter added that billionaires paid state income tax equal to 1.6% of their $1.4 trillion wealth gain between 2019 and 2025.

The letter stated: “A one-time tax of 5% on the wealth of California’s 250 billionaires would raise as much revenue as a 5% income tax on all Californian taxpayers: about $100 billion. The wealth tax would be modest relative to the gains made by billionaires, yet large enough to offset the federal cuts to Medicaid.”

Opposition to Proposition 40 has been funded by several wealthy residents. Golden State Promise received $5 million from Chris Larsen, and Ripple Labs provided an additional $5 million. Larsen also directed $10 million to Building a Better California, a political action committee formed this year to oppose the measure. Venture capitalist John Doerr contributed $7.5 million to the same committee. Sergey Brin has contributed about $102 million to efforts against the tax after moving a large share of his holdings out of California. Larsen’s net worth is estimated at $8.4 billion; a 5% one-time levy on that amount would be about $420 million.

Building a Better California has backed two competing ballot measures, Proposition 41 and Proposition 42. Either of those measures could draw enough votes to prevent the billionaire tax from taking effect even if voters approve Proposition 40, creating a ballot dynamic in which multiple initiatives can cancel one another depending on vote totals.

Proposition 40’s backers say the measure targets extreme wealth concentration in the state and would fund public needs without increasing taxes on typical residents. Opponents argue the proposal could push capital and high-income residents out of California and have mounted an early, well-funded campaign to block it. Both sides are preparing for an expensive final stretch of campaigning ahead of the Nov. 3 vote.