California Governor Gavin Newsom has become the latest high-profile liberal leader to call for a national wealth tax – confirming that this ill-conceived policy proposal will become a litmus test that 2028 contenders for the Democrat Party presidential nomination must pass.
Ostensibly, Newsom has proposed this scheme as an alternative to a ballot measure the Service Employees International Union (SEIU) got approved to go before voters this November. This measure would impose a five percent wealth tax on the assets of every Golden State billionaire. Newsom opposes it, writing on Substack, “This is not how we should set California’s budget priorities… We make those decisions together through the elected Legislature.”
But Newsom’s shockingly draconian COVID-19 lockdown policies prove that he doesn’t really care about the legislative process or making decisions “together” with anyone. Newsom’s actual reason for opposing the SEIU ballot initiative is his fear that it would accelerate the exodus of companies and wealthy individuals who make up the Golden State’s tax base. As he put it, “You may not be able to pick up and move to Texas or Florida to shelter your income from taxation, but I promise you that billionaires can, and do.”
However, Newsom’s solution isn’t to simply dispense with this bad policy. Instead, he favors a national wealth tax that billionaires can’t escape by leaving his state. But as the Editorial Board of the Washington Post points out, Newsom’s proposal is hardly limited to the ultra-wealthy:
“Like most calls for taxing the super-rich, Newsom immediately broadens his out to cover more people. In a social media video promoting his idea, he begins by saying, ‘It’s time for a national billionaire’s tax.’ Then, in the very next sentence, he says, ‘Ten percent of people in this country own two-thirds of the wealth.’ Billionaires account for only 0.0006 percent of federal income tax filers… the cutoff in adjusted gross income for the top 10 percent of income tax filers is about $188,000.”
In other words, the governor’s national wealth tax isn’t really aimed at the nation’s 989 billionaires. If enacted by Congress and signed into law (presumably by future President Newsom) it would pick the pockets of millions of people who make less than $200,000 per year – a great income, to be sure, but hardly an amount that places someone in the same category as Elon Musk or Jeff Bezos.
But that might not be the worst part. Newsom’s proposal would be far more damaging than a mere income tax. Like every other Democrat “wealth tax,” including the Ultra-Millionaire Tax Act of 2026 introduced by Sen. Elizabeth Warren (D-MA), Newsom’s scheme would include taxing unrealized capital gains.
This would supercharge the federal government’s confiscatory powers. Despite the claim that it would apply only to billionaires, it would inevitably affect virtually everyone reading this column. It would permit the IRS to tax an increase in the value of your home as capital gains—even if you haven’t sold it. This is similar to a tax endorsed by former Vice President Kamala Harris during her failed presidential bid. It would have imposed a 25 percent tax on the unrealized income of “wealthy” Americans. As the Cato Institute’s Adam N. Michel explains:
“The core problem with taxing unrealized gains is that there is not actually anything to tax until the asset is sold for a profit. For example, if I purchase a house for $400,000 and it appreciates by $50,000 the following year—an unrealized gains tax at 25 percent would mean I owe the government $12,500, regardless of whether I sell the house or have the cash on hand to pay the bill. If you don’t have the cash, such a system would force you to sell your home or take out a loan to pay the government.”
Such a policy would be particularly disastrous for seniors on a fixed income. Imagine you’ve spent 30 years making mortgage payments and finally have a paid-off home. You get by with a meager Social Security check and perhaps a pension or 401(k). Then the government comes knocking and says you owe them tens of thousands of dollars in unrealized gains. Pay up, or they’ll take your house.
Governor Newsom insists that his national wealth tax is necessary to “save our democracy,” yet his scheme clearly violates Article I, Section 9 of the Constitution: “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken.” Obviously, a national wealth tax would be a direct tax, and imposing it on billionaires only would flout this constitutional requirement. This is why the 16th Amendment had to be passed and ratified just to render taxes on realized income constitutional.
Even what we think of as “normal” income taxes would certainly horrify the framers of the Constitution. For the first 73 years of the republic, they didn’t exist. Then, the huge cost of the Civil War prompted Congress to pass the first income tax in 1862, but it was phased out after the war. Congress passed another income tax law in 1894, but the Supreme Court struck it down in 1895. The first permanent income tax was imposed by Democrat President Woodrow Wilson and, as Phillip W. Magness writes in the Coolidge Review, he went after “the rich.”
“The rich were to be taxed at extravagant rates not because of their means but because, Wilson claimed, their incomes benefited the most from the industrial mobilization demanded by war. Indeed, in Wilson’s telling, taxation became synonymous with patriotism and the American military cause: ‘Our financial program must no more be left in doubt or suffered to lag than our ordnance program or our ship program or our munitions program, or our program for making millions of men ready.’”
If this sounds like the current Democrat calls for the rich “to pay their fair share,” it is by no means a coincidence. After winning reelection in 1916, Wilson and his Democrat accomplices in Congress enacted a stunning series of increases in the top tax rate, eventually reaching 77 percent. After the Republican Party won large majorities in Congress in 1918 and Republican Warren G. Harding captured the White House in 1920, they reduced income tax rates in 1921, 1924, and 1926 under three successive Republican administrations and Congresses.
All of which suggests that, for more than a century, Democrats have demonstrated they really can’t be trusted with the power to tax and spend. Newsom is merely living up to a long tradition in his party.
The names and faces have changed, but the basic progressive scam is still the same. Newsom and his ilk promise to “tax the rich” and then inevitably lower the threshold for who counts as “rich.” Before long, it’s all of us – leaving everyone poorer as a result.
David Catron is a Senior Editor at the American Spectator. His writing has also appeared in PJ Media, the American Thinker, the Providence Journal, the Catholic Exchange and a variety of other publications.
