Nobel-Winning Economist Daron Acemoglu Backs California Billionaire Tax

Nobel Prize-winning economist Daron Acemoglu took to X on Wednesday to elucidate why he had signed a letter backing California’s billionaire tax.

The letter, printed Saturday and signed by six Nobel laureates, together with Acemoglu, helps Proposition 40, which might impose a one-time 5% tax on California billionaires, with the vast majority of revenues directed to healthcare within the state.

The six signatories — Acemoglu, Abhijit Banerjee, Peter Diamond, Esther Duflo, Paul Krugman, and Joseph Stiglitz — referred to as the vote “the primary alternative for the individuals to begin reining within the energy of billionaires.”

In his X publish, Acemoglu stated he was not satisfied that everlasting wealth taxes can be mandatory underneath an optimally designed tax-and-transfer system. However the US system is “very removed from optimum,” he wrote, as a result of it taxes labor revenue extra closely than capital revenue.

That disparity permits rich enterprise house owners to obtain compensation in inventory and borrow towards their holdings, lowering their tax payments, Acemoglu — who gained a Nobel Prize in 2024 for his work on wealth disparities between nations — wrote.

In his X publish, he additionally argued that the tax code favors spending on equipment and AI over hiring staff.

Acemoglu stated there are three grounds on which he thinks a brief wealth tax is justifiable

1. “It partially reverses the consequences of greater than twenty years of tax avoidance by the very rich.”
2. “It acts as a brake on their rising dominance over the political course of.”
3. “It might pave the way in which for extra complete tax reform on the federal stage.”

The letter estimates that Proposition 40 may elevate about $100 billion from California’s roughly 250 billionaires. Collectively, it states, they’re value $2.3 trillion — greater than triple the $700 billion held by the state’s wealthiest 0.001% a decade in the past.

The proposal has drawn opposition from tech billionaires. Google cofounder Sergey Brin has contributed $102 million to Construct a Higher California, a gaggle campaigning towards Proposition 40 and supporting rival measures that would block the tax, in line with marketing campaign filings.

Acemoglu acknowledged within the publish that the measure is “not excellent.” A federal tax would cut back capital-flight risk, he wrote, whereas fewer restrictions on the income may assist the federal government use it extra flexibly.

Nonetheless, he stated a brief tax may recuperate income misplaced by way of tax avoidance, restrain the political energy of maximum wealth, and spur broader federal reform.

With few alternate options out there, Acemoglu wrote, California’s proposal “deserves assist.”