If in November’s referendum Californians unwisely enact a wealth tax, they will illustrate two axioms: Wisdom is the anticipation of consequences. And we are punished not for our sins but by them.

The consequences of a one-time (supposedly; see below) 5 percent tax on the net worth of billionaires are already arriving. Some of California’s wealthiest, who constitute a large portion of the state’s precarious fiscal base, are leaving. The richest 1 percent of taxpayers supply about 40 percent of the state’s personal income-tax revenue.

U.S. federalism is 50 permanent incentives for entrepreneurial governance. Capital and talent are mobile; they go where they are welcome, and remain where they are well treated. Wise states compete to be hospitable. Unwise ones, with self-defeating insouciance, ignore federalism’s incentives. They denounce such competition as a “race to the bottom.” The top, as those states define it, is a fantasyland where government can extract as much as it wants from immobile wealth.

Mobility, by the way, is not just between states. Issues & Insights reports that the 2,589 counties where Donald Trump won majorities in each of the past three elections gained 5.4 million people from net migration since 2020. The 433 counties won by Hillary Clinton, Joe Biden and Kamala Harris had a net loss of 5.43 million. Of the 50 counties with the biggest net population gains, 46 voted three times for Trump. Being red, they are presumably enterprise-friendly.

In a March report, Stanford University’s Hoover Institution scrutinized California’s proposed tax on net worth (income, cash, securities, real estate, fine art, vintage wine, yachts, and on, and on). The report concludes that even if the administratively complicated — and legally contestable — calculations are feasible, the tax would collect $40 billion rather than the $100 billion its proponents project. Nearly 30 percent of the targeted tax base (more than $550 billion) has already left the state. So, with more billionaire departures predictable, the net present value of the act is negative: “The present value of permanently lost income tax revenue more than offsets the one-time wealth tax collections.”

And it probably would not be a one-time tax. The measure would lift California’s cap on taxes on intangible personal property, with no sunset or reinstatement provision. Hoover: “Future ballot initiatives can impose additional wealth taxes at any rate, on any threshold. Measures pitched to voters as temporary or emergency measures are regularly repeated or extended.”

Philip Hamburger, Columbia University law professor and CEO of the New Civil Liberties Alliance, argues (in the Wall Street Journal) that California’s proposed tax is either an uncompensated taking, or a deprivation of property without due process, in violation of the Fifth and 14th amendments. Because it targets very few Californians (about 200 billionaires), and (supposedly) only once, these attributes make the proposed measure less like taxation (which is generally a recurring and widespread burden) and more like confiscation.

Baker Botts, an international law firm, says that, if enacted, the wealth tax might be challenged as a bill of attainder. The Constitution forbids such bills, which target specific individuals or groups in order to impose punishment without trials. The reason to call the wealth tax punishment is that a majority is targeting an unpopular minority.

Although the wealth tax is a cafeteria of unintended economic consequences, even cumulatively they are less ominous than one predictable, and perhaps intended, political consequence. The tax would effect a radical, and probably irreversible, change in the relationship of the individual to any government that enacts such a tax.

Laura Williams of the American Institute for Economic Research, writing for Reason, says the tax would give government a roving license “to inventory every item in our possession.” This would likely be a prelude to repeated confiscations of percentages of the possessions’ value. Even worse, the infrastructure for administering the tax would mean a permanent enlargement of the government’s intrusiveness. This would contract the sphere of individual autonomy, and subtract from the security of liberty.

Joe Biden inadvertently advertised progressivism’s unspoken, because embarrassing (because correct), conviction: People do not want progressivism’s spending menu enough to pay for it. As president, he said the tax increases he favored to fund his spending increases should be shouldered by two unpopular constituencies — corporations and “the rich,” defined as the roughly 2 percent with annual incomes over $400,000.

California’s proposed wealth tax is a reason to merge the two axioms in the first paragraph. It is a political sin not to be wise about anticipatable consequences.

© Washington Post