The US tax code disproportionately penalizes "super earners"—individuals with high W-2 income but few assets. While billionaires defer taxes through asset appreciation, professionals earning over $1M face immediate, high marginal tax rates on their income, sometimes exceeding 50%, making it harder for them to build wealth.

Despite voter popularity, broad wealth taxes are historically ineffective. Most OECD countries have abandoned them due to low revenue, administrative complexity, and capital flight. A more practical approach is to focus on targeted reforms like closing the carried interest loophole and taxing capital gains as ordinary income.

Congressman Ro Khanna proposes a tax on the total net worth of individuals with over $100 million. Unlike an income or capital gains tax, this targets unrealized wealth, forcing the liquidation of assets like stocks to generate the cash needed to pay the tax.

The wealthiest individuals don't have traditional paychecks. Instead, they hold appreciating assets like stock and take out loans against that wealth to fund their lifestyles. This avoids triggering capital gains or income taxes, a key reason proponents are pushing for a direct wealth tax in California to address this loophole.

The proposed tax on billionaires' assets isn't about the billionaires themselves, who hold a fraction of national wealth. The real goal is to establish the legal precedent for a private property tax. Once normalized, this mechanism can be extended to the middle class, where the vast majority of assets reside.

The wealthy pay less tax not because they earn less, but because they focus on reducing *taxable income*. Investments like real estate provide legal deductions such as depreciation, which significantly lowers the income they actually pay taxes on, a concept unavailable to most W-2 earners.

Threatening to confiscate wealth from the most mobile people incentivizes them to leave. This capital flight has already begun in response to the proposal, proving such policies ultimately reduce the state's long-term tax revenue by driving away the very people they aim to tax.

Newsom opposes a state-level wealth tax, citing the reality of capital flight where high-net-worth individuals simply move to other states. However, he strongly advocates for a federal wealth tax, along with changes to capital gains and inheritance laws, to prevent this "race to the bottom" between states.

Billionaire wealth taxes are easily dodged by relocating. A more robust policy would tax capital gains based on the jurisdiction where the value was created, preventing billionaires from moving to a zero-tax state just before selling stock to avoid taxes.