{"id":2497,"date":"2026-07-05T14:10:36","date_gmt":"2026-07-05T14:10:36","guid":{"rendered":"https:\/\/interstatelogisticshubs.com\/?p=2497"},"modified":"2026-07-05T14:10:36","modified_gmt":"2026-07-05T14:10:36","slug":"is-californias-billionaire-tax-act-constitutional","status":"publish","type":"post","link":"https:\/\/interstatelogisticshubs.com\/?p=2497","title":{"rendered":"Is California\u2019s Billionaire Tax Act constitutional?"},"content":{"rendered":"
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In November, California citizens will vote on the Billionaire Tax Act (BTA), a ballot measure that would impose a 5-percent tax on the net worth of citizens with a net worth of $1 billion.\u00a0\u00a0If California citizens approve this measure, you can be sure that it will be challenged in the courts.\u00a0\u00a0Because the Act conflicts with the California Constitution, it is proposed as an amendment to the Constitution.\u00a0\u00a0We should also anticipate challenges to the BTA as a violation of the U.S. Constitution as well.\u00a0<\/p>

Read more Tampon Tim Walz pardons a child rapist<\/a><\/p>\n

The California Constitution caps taxes on certain intangible property at 0.4 percent.\u00a0\u00a0The higher tax imposed by the BTA would supersede this cap on taxation of intangible property in the Constitution.<\/p>\n

The California Constitution also imposes a limit on total state appropriations.\u00a0\u00a0The GANN Amendment, enacted in 1979, limits total state appropriations to the appropriations in the prior year adjusted for the rate of inflation and population growth.\u00a0\u00a0The BTA will likely generate revenues in excess of the GANN limit.<\/p>\n

The GANN Amendment has proven to be an ineffective limit on total state appropriations in California and would not likely be a constraint on taxes imposed by the BTA.\u00a0\u00a0Special interests in California have been successful in exempting state expenditures for education and capital improvements from the GANN limit.\u00a0\u00a0In fact, proponents of the BTA have anticipated this issue by proposing the allocation of revenue generated by the tax into a dedicated fund, separate from the general fund.<\/p>\n

The BTA will likely be challenged as a violation of the due process clause in the California Constitution, which provides that \u201ca person may not be deprived of life, liberty or property without due process of law or denied equal protection of the laws.\u201d\u00a0\u00a0This challenge will likely fail because of the California Supreme Court\u2019s interpretation of the due process clause.\u00a0\u00a0This interpretation, referred to as \u201csubstantive due process,\u201d sanctions the law if the state can claim legitimate public interest.\u00a0\u00a0The creation of a dedicated fund for the revenue generated by the BTA, earmarking those funds for health, education, and food assistance, provides the rationale for approving the law in this substantive due process interpretation.<\/p>\n

The term \u201cproperty\u201d encompasses any benefit to which a person has a claim or entitlement.\u00a0\u00a0This broad interpretation of property is especially important for billionaires, for whom intangible property accounts for most of their net worth.\u00a0\u00a0Intangible property includes assets such as publicly traded stocks, private equity, and intellectual property (patents and trademarks), voting rights, and dividend rights associated with these shares.\u00a0\u00a0It is difficult to see how California can measure, let alone tax these intangible assets.<\/p>\n

Like all taxes, the BTA would have unintended consequences.\u00a0\u00a0Because much of the net worth of billionaires is in unrealized capital gains, the BTA is really a tax on entrepreneurship.\u00a0\u00a0Billionaires use their entrepreneurial skills to launch enterprises with the expectation that these ventures will generate profits over some future time period.\u00a0\u00a0Because the BTA taxes unrealized capital gains in these enterprises, it will deter entrepreneurial activity.\u00a0\u00a0This is already happening, as billionaires flee California for other states with more business-friendly tax environments.\u00a0\u00a0That has diminished the tax base and tax revenues that would have been generated by these enterprises.\u00a0\u00a0<\/p>

Read more Declaration of independence or dependence?<\/a><\/p>\n

The BTA has already had a negative impact on investment and jobs in California, even before it will be voted on this fall.\u00a0\u00a0Passage of the BTA would accelerate this loss in business activity and jobs.\u00a0\u00a0In addition to billionaires, passage of the BTA will deprive many California citizens of the rights guaranteed to them in the due process clause.<\/p>\n

Despite the many constitutional issues surrounding the BTA, it is likely to be approved by California citizens.\u00a0\u00a0But they should be careful what they wish for.\u00a0\u00a0The tax is clearly designed to redistribute wealth by taxing the super-rich.\u00a0\u00a0But taxation of the super-rich is likely to be followed by taxation of the wealth of a broader group of citizens in the long run.\u00a0\u00a0This was the path followed after passage of the income tax.\u00a0\u00a0The income tax was first imposed on the super-rich to finance the Civil War.\u00a0\u00a0Passage of the 16th Amendment in 1913 granted Congress the legal authority to levy taxes on income from any source.<\/p>\n

Most citizens have accumulated wealth in their homes, retirement accounts, and other real and financial assets.\u00a0\u00a0A tax on net worth could easily be extended to these forms of wealth as well.\u00a0\u00a0That could include a lot of citizens: California has more than a million households with net worth in excess of one million dollars.\u00a0\u00a0Across the U.S. there are more than 24 million households with net worth in excess of one million dollars \u2014 one in every eleven adults.<\/p>\n

The BTA will also likely be challenged in the U.S. Supreme Court as a violation of the due process clause in the U.S. Constitution.\u00a0\u00a0The 5th Amendment provides that the federal government cannot deprive citizens of \u201clife, liberty, or property, without due process of law.\u201d\u00a0\u00a0The 14th Amendment extended due process rights to the states as well as the federal government.\u00a0\u00a0Over much of the 20th century, the U.S. Supreme Court adopted the substantive due process interpretation of these amendments.\u00a0\u00a0As a result, economic liberties were subject to a lower standard of judicial review than personal liberties.<\/p>\n

However, in recent years, the Supreme Court has begun to interpret the due process clause from an originalist perspective.\u00a0\u00a0For the founders, there was no distinction between economic and personal liberties; both are subject to the same standard for judicial review.\u00a0\u00a0Just as a person has a right to freedom of speech, religion, assembly, and other personal liberties, he also has a right to work, save, invest, and accumulate property.\u00a0\u00a0If he has a right to his person, he has a right to use his faculties in the ordinary business of making a living.\u00a0\u00a0Economic liberties are an extension of his personal liberties.\u00a0\u00a0The due process clause provides that all citizens have the right to pursue life, liberty, and property, including billionaires.\u00a0\u00a0The BTA taxation of the net worth of billionaires is a violation of their due process rights under the U.S. Constitution.<\/p>\n

Barry W. Poulson is professor emeritus at the University of Colorado, Boulder, and on the Board of the\u00a0Prosperity for US Foundation.<\/em><\/strong><\/p>

Read more When your broker wears boots and a Western hat<\/a><\/p>\n

Bob Carlstrom is the executive director of the\u00a0Prosperity for US Foundation.<\/em><\/strong><\/p>\n

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\"<p><em>Image:<\/figure>\n<\/em><\/strong><\/p>\n

Image: Famartin via Wikimedia Commons, CC BY-SA 4.0 (cropped).<\/em><\/em><\/strong><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

In November, California citizens will vote on the Billionaire Tax Act (BTA), a ballot measure that would impose a 5-percent tax on the net worth of citizens with a net worth of $1 billion.\u00a0\u00a0If California citizens approve this measure, you can be sure that it will be challenged in the courts.\u00a0\u00a0Because the Act conflicts with […]<\/p>\n","protected":false},"author":1,"featured_media":195,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[151,2],"tags":[1020],"class_list":["post-2497","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-california","category-politics","tag-related-topics-california-tax-the-rich"],"yoast_head":"\nIs California\u2019s Billionaire Tax Act constitutional? - Interstate Logistics Hub<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/interstatelogisticshubs.com\/?p=2497\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Is California\u2019s Billionaire Tax Act constitutional? 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