Economist: If California Adopted Texas-Style Property Taxes, Revenue Would Far Exceed a Billionaire Tax - Sing Tao Daily

California voters are about to vote on the highly controversial "Proposition 40"—a wealth tax targeting billionaires.

However, economists point out that the "original sin" of California's tax structure is actually "Proposition 13," passed nearly 50 years ago.

If California were to repeal that law and raise property tax rates to match Texas, the added revenue would far exceed a billionaire tax and would more effectively make the wealthy pay their fair share.

Key points of this article: · Key measures: Proposition 40 (billionaire tax), Proposition 13 (limits on property taxes) · Core argument: Economists believe repealing Proposition 13 would increase revenue more effectively than imposing a billionaire tax · Data comparison: California's average property tax rate is only 0.8%; raising it to Texas's 2% would more than double revenue · Potential impact: A billionaire tax could drive the wealthy out of state and trigger a wave of litigation Proposition 13: The "Original Sin" of California's Tax Structure In 1978, California voters passed Proposition 13, capping property taxes at 1% of assessed value, limiting annual increases to 2%, and requiring reassessment at market value only after a sale or major renovation.

This forced California to rely instead on income taxes (including capital gains taxes) to raise revenue.

Today, California has the most progressive income tax structure in the nation, with a top marginal rate of 13.3%.

The top 1% of high earners contribute as much as half of state tax revenue, which also makes the state treasury highly vulnerable to stock market fluctuations.

At the same time, the ultra-wealthy often borrow against their assets to sustain their lifestyles, thereby avoiding some taxes.

The upcoming Proposition 40 would require residents with net assets exceeding $1 billion to pay a one-time tax equal to 5% of their assets.

Supporters say it could raise $100 billion, but opponents warn it would drive the wealthy out of California.

Is Raising Property Taxes More Effective?

Princeton University economist Owen Zidar and University of Chicago Booth School of Business economist Eric Zwick wrote in The New York Times that if California is looking for a large pool of undertaxed wealth, "a better, bigger target is right under their feet." They call Proposition 13 the "original sin" of California's tax structure and argue that repealing it is a "more effective and more durable way" to make the wealthy pay their fair share.

The two economists estimate that because home prices have risen faster than property taxes, California homeowners pay an average property tax rate of just 0.8%.

By comparison, Texas homeowners pay an average of 2%.

If California matched Texas, total residential property tax revenue would more than double, while home prices would fall by about 13%.

Billionaire Tax Could Trigger Litigation and Drive Out the Wealthy However, repealing Proposition 13 would inevitably face strong opposition from voters.

But experts warn that taxing a handful of billionaires alone to meet California's enormous fiscal needs is unrealistic.

Former White House economic adviser Laura Tyson and Lenny Mendonca, former chief economic adviser to California Governor Gavin Newsom, noted that before the proposed effective date of the billionaire tax, six billionaires who would have owed about a quarter of the projected revenue had already left California.

They warn that because Proposition 40 proposes a new, untested method of taxation based on all assets, it will trigger a "wave of litigation, making the promised funds speculative and unreliable." They suggest that instead of taxing billionaires, California should increase taxation of capital income—the source of wealth—by raising corporate tax rates and taxing realized and unrealized capital gains, among other measures.

Source: Yahoo Finance Cover image source: Independent U.S.

Senator from Vermont Bernie Sanders speaks at a campaign rally in Los Angeles on Monday, October 5, 2026, in support of California Proposition 40, the so-called "billionaire tax."