‘I don’t trust them when they say it is temporary.’
Allen Prohofsky was the former chief economist for California’s Franchise Tax Board until 2023. After he retired he acted as a consultant to the team of economists that designed Proposition 40, which would impose a “one-time” 5 percent wealth tax on people with holdings that top $1 billion.
He knows the measure in and out, and he’s just told Bloomberg News: “I don’t trust them when they say it is temporary. I’m very seriously thinking of voting against it.”
His statement should rattle the drafters of Prop 40, a group of four radical academics who all worked on the wealth tax that Senator Elizabeth Warren proposed during her 2020 presidential campaign.
They are David Gamage, a law professor who worked in the Obama Treasury Department; Emmanuel Saez, a French economist who teaches at UC Berkeley; Brian Galle, a UC Berkeley law professor and former Biden SEC senior fellow; and Darien Shanske, a UC Davis law professor who has been a consultant for the SEIU-UHW union that is sponsoring Prop 40.
All four believe they are part of making history. “If Prop. 40 passes and is viewed as successful, a lot of other states and the federal level will be looking to do something similar,” Gamage told Bloomberg.
Three new polls show the wealth tax below the 50 percent support threshold it needs to pass, and it has lost momentum. One reason is a study by Hoover Institution economists Joshua Rauh and Benjamin Jaros who estimate Prop 40 would collect only $30 billion, far less than the $100 billion projected by its backers. They estimate that, as a one-time levy, it would ultimately produce a net loss of $38.9 billion by spurring enough departures of high-income people from the state so that it would lose more in income tax revenue than it would gain.
No wonder that Prohofsky doesn’t believe the tax would be “temporary.”