Zucman and Rauh Clash Over California's Proposed 5% Billionaire Wealth Tax

Zucman opened by saying he thinks Proposition 40 has a good chance to pass. In his words, "I think there's overwhelming demand and popular support for taxing billionaires."

He acknowledged that billionaires have spent more than $300 million to fight Proposition 40, the California billionaire tax, and said this might have some effect on the vote. He argued, however, that the measure is hugely popular across California, the United States and globally.

Rauh responded that prediction markets put the measure's chance of passing at only about 25 or 30 percent, and said that is what he expects to happen. He argued that voters are listening to the reasons against the tax.

He contended that the tax would not be a revenue collector for California because of net losses in future income tax streams from billionaires who leave. He also said it would hurt the economy: when founders leave California, the startup ecosystem is threatened and they take their jobs with them. He said he believes voters understand this and that Proposition 40 will fail.

The interviewer noted that someone like Mark Zuckerberg is staying in California and suggested that the company is, in effect, paying for him to stay. Zucman rejected that, saying the company is not paying for him to stay and that Zuckerberg would pay the wealth tax, more than $10 billion.

Zucman added that Zuckerberg has committed to staying in California for at least eight more years and would keep his 60% of voting rights in Meta. He called Zuckerberg a good illustration that the supposed exodus people keep hearing about does not make sense and is not happening in reality.

Asked whether he considers the arrangement that lets Zuckerberg keep control of Meta a good outcome, given a governance expert's comments earlier that morning that it perverts the system, Zucman said billionaires like Zuckerberg can control the firms they own while holding a relatively small economic stake. In his example, they hold 10% of the company but more than 50% of the voting rights.

Zucman said he thinks that is not a great system, but that it has nothing to do with the California billionaire tax. He argued that the Meta deal shows that if the company wants to let him keep control, it can find ways to pay the tax, and that he would stay in California and nothing would change for Meta.

Rauh addressed billionaires who have said they would move out of California or have already moved. He said it is very hard to become a non-resident for tax purposes: you have to change schools for your children, change your burial plots and change everything.

He said the best experts on residency law for state tax purposes believe no billionaire was able to successfully move out of California before January 1, 2026, meaning they would all be on the hook for the 5% wealth tax.

The interviewer said Rauh is on the other side and believes the measure will damage the state, then asked why people like Rauh have not advocated for other measures that might raise funds and be more palatable than taxing unrealized gains. Rauh first pushed back on the premise that departures are not happening. He said the people who left California in response to the initiative announced in October 2025 had very sophisticated attorneys who knew all the boxes to check to establish residency outside California. He said significant numbers of billionaires left before the end of 2025, and that this has been documented.

Rauh then argued that the measure is predicated on the claim that California faces a fiscal emergency or needs more money, and said that claim should be examined.

Rauh said total funds for Medi-Cal, California's Medicaid program, are up 123% since 2019, more than double. He said California spends $219 billion on Medi-Cal from state and federal sources, which he put at over $7,000 per California resident, not per person on Medi-Cal. He said federal Medicaid funds are up 113% since 2019 and that last year's reconciliation bill slows the rate of growth of federal money flowing to Medi-Cal.

Rauh said that does not mean there is a fiscal emergency. General Fund spending in California is up 79% over the last seven years, he said, and the idea that the state needs more revenue is a flawed one. Californians should take a close look at the efficiency of spending, he argued, not only on health care but on education and many other things.

Asked to specify what he would cut, Rauh said he is not in charge. He said he would look at how a program whose cost has gone up 123% since 2019 can be running. He said he does not think California residents are saying their services are much better than they were seven years ago.

Rauh said it is not up to him to decide specific cuts. Instead, he said, pressure needs to be put on elected officials to look into whether the state is stewarding public funds efficiently, and in his view the evidence shows that they are not.

Zucman responded that if Proposition 40 does not pass, 3 million Californians are going to lose health insurance and Medi-Cal coverage. He said there is no Plan B, that everybody agrees with that, including Governor Newsom. He framed the choice as asking 250 billionaires to pay just 5% of their wealth in tax.

He said the tax would bring their wealth back down to where it was just a few weeks or a few months ago, because their wealth has been multiplied by three since 2023. He argued they would have to pay 5% to allow 3 million people to keep access to health insurance and health care.

Zucman said Medi-Cal covers undocumented immigrants from an early age all the way through, and that they are covered with state funds rather than actual federal funds. He argued that because money is fungible, federal funds, whether or not they are earmarked for that purpose, end up covering health care for everyone in California. He noted that Republicans had argued during the government shutdown that no federal funds were being used, but said federal money does cover everyone under Medi-Cal, which is why spending is up 100%.

Rauh agreed that covering undocumented immigrants costs California up to $10 billion per year. He argued that money is fungible and that last year's reconciliation bill simply slows the rate of growth of federal spending. He said the idea that millions of people will lose health insurance is not credible because the state is swimming in money. He pointed to a state balance sheet that is $75 billion larger than in 2019, and asked where the emergency need for $100 billion is that he said Zucman was using to justify seizing the assets of people who built companies in California.

The interviewer said the more socialism one tries, the more it ends up causing the need for even more socialism until there is no money left anywhere, and asked whether he had the wrong idea about what is happening in France. Zucman responded that people in France are protesting in large part to tax billionaires and the super rich, who he said do not pay tax there, just as in California. He said education spending has been falling in France and that schools and universities are crumbling, so people want billionaires to pay their fair share.

Joe responded that higher taxes in France are not the answer and asked whether there are any billionaires in France at all. Zucman said the 500 wealthiest people in France own wealth equivalent to 35% of France's GDP, which he said is not very different from California, where its 250 billionaires have combined wealth equivalent to 50% of California's GDP.

Zucman said California's 250 billionaires have combined wealth equal to 50% of California's GDP, and that their combined wealth is as big as the total income reported by 20 million California families on their individual income tax returns. He said there is an enormous amount of wealth at the top in both California and France, and that in both cases it is untaxed.

Zucman asked why people should accept that the most powerful people in the world do not contribute to the common revenue needs of society.

Rauh responded that it is not a zero-sum game, saying the billionaires did not take their wealth from the 20 million families Zucman was comparing it to. He said they created the wealth in a place called Silicon Valley, which has the greatest companies in the world and which the state reports on every single day.

Rauh said wealth creation should be celebrated and cherished, not used punitively, and called the claim that 20 million families do not have anything a specious argument and sophistry. Zucman responded that creating a business should not give someone the right not to pay taxes, arguing that the wealth is created with benefits from infrastructure, universities, the ecosystem and the work of others.

The interviewer asked whether Zucman would prefer doing the tax on a national basis or doing something else to raise taxes nationally. He said a statewide basis creates much more complicated and perverse incentives for people to leave the state over time, and raised the balance issue of whether the state can actually collect all of these taxes.

The interviewer also asked how Zucman thinks about options such as taxing at death, step-up basis, carried interest and capital gains taxes, arguing there are probably many things to do before taxing unrealized gains that could raise as much or more money on a national basis. He asked whether Zucman would advocate those options or whether he is only doing this because he thinks it is the only option.

Zucman said a federal tax is of course easier to do than a state one, but that if Proposition 40 passes in California, it will pave the way for a federal tax. He pointed to the income tax, which at the beginning of the 20th century was first created by a number of states, most famously Wisconsin in 1911, and said that paved the way for the federal income tax.

On the second question, Zucman said there are many things to fix in the income tax and estate system, but such fixes would not address the fundamental issue that billionaires pay very little. He said these billionaires find ways to report no or very little taxable income, so no matter what the rate on income is, it does not address the problem. He cited Sergey Brin, Larry Page and Mark Zuckerberg reporting no income in some years, paying themselves no salary, their companies paying no dividends and them selling no shares.

The interviewer said Andrew wants to get to some of the stepped-up basis issues in a different way, then asked Rauh, given his position on the California measure, whether he thinks there are things to do in the tax code that would raise additional taxes, or whether there should be no effort to raise additional taxes whatsoever.

Rauh said you can look at some of these loopholes, and that he is all for closing loopholes that would improve revenue collection, which should be looked at. He said, however, that the number one problem is spending and spending efficiency.

Rauh also disputed the numbers commonly cited for the buy, borrow, die strategy of borrowing against assets to fund consumption. He said those figures have been wildly misstated because they include margin lending on stocks, which is not only for billionaires but for everybody, and loans against private businesses, and pointed to a Yale Law School study showing how minor these strategies are. He said Zucman's assertion that billionaires are not paying taxes is based on SEC filings about what they are doing with shares in their companies, that Zucman has no data on family offices and how much tax they pay, and that billionaires do tax-efficient investing. He concluded that the assertion these people are not paying tax is not correct.

Rauh added that any time billionaires want to realize gains, they are going to pay taxes. He asked whether it would have been nice if the SpaceX IPO had happened while Elon Musk was still in California, and asked Californians whether they want to drive away the next generation of founders. He cited Mark Cuban saying he is not going to invest in startup companies in California.

The interviewer recalled that Musk paid about $11 billion in taxes a couple of years ago and asked who historically is anywhere near that figure. He referred to Elizabeth Warren's claim that Elon Musk does not pay any taxes and asked who is even close to that number, whether lifetime or anybody at all.

The exchange was cut short as the speakers moved on, with one speaker noting that other people on the list that Emmanuel and April want to pick up in their dragnet would be the likely answer.