California’s 2012 tax on millionaires has apparently not stopped billionaires from multiplying like rabbits and sticking around to enjoy their money.
California gained 20 new billionaires in the past year, according to Forbes’ annual tally, bringing their total to 131. That is about 1 out of every 14 in the world, and more than any other country except China and the rest of the United States.
Nine of the new California billionaires are under 40 and seven are in the Silicon Valley. Two are foreign nationals living in the state.
The world’s 1,826 billionaires are worth $7.05 trillion, a figure larger than the combined gross domestic products of Germany and France. There are 181 more than a year ago and 449 more than two years ago
They wield enormous influence in the world and are the 1% of the 1%. They and their diminutive millionaire cousins have fared well since the Reagan revolution kicked in 30 years ago compared to everyone else, as income inequality has grown in the state, nation and world.
The hollowing out of the middle class and expansion of the lower class was accelerated by the Great Recession. State governments scrambled to adjust their progressive tax codes to maintain revenues in the face of market-driven economic redistribution and some went so far as to single out millionaires for special levies.
The fear, of course, was that billionaires would vote with their feet and take their money to friendlier states. A 2012 study (pdf) of California by Stanford and Princeton universitities, which noted that eight states who had placed a “millionaire’s tax” on the highest earners, found that there was a basis for that fear, but that it had not yet become realized.
California and the other states made a lot of money off their millionaires and needed it to balance budgets massacred in the economic downturn. The stock market bounced back and the official unemployment rate dropped, but real wages have stagnated for decades and traditional tax bases remain whacked.
The researchers studied how California migration trends were affected by tax cuts in 1996 and a millionaire’s tax in 2005. The millionaire population grew from 15,000 in 1990 to 150,000 in 2007. “This pattern does not indicate that the recent tax changes were of major concern to top-income earners,” the report said.
Californians raised the tax rate on millionaires again in 2012 with passage of Proposition 30. It raises the tax rate for the top bracket from 10.3% to 13.3% for seven years, giving the state the highest top marginal tax in the country. Yet, no state has a higher proportion of residents earning more than $1 million annually per capita.
Peter Hart at Fair & Accuracy in Reporting (FAIR) looked at the report and concluded: “Millionaires aren't likely to move away from, say, their beachfront Malibu home to the suburbs of Nevada in order to reduce their income tax rates.”
That may be true, but the study did find one factor that had a decisive effect on the migratory pattern of millionaires—divorce. “In the year of divorce, the migration rate more than doubles, and remains slightly elevated for two years after the event.”
The Top 20 billionaires in California, according to Forbes, are: