Haven’t these idiots heard of the ‘Laffer Curve’?

Monday blog

A couple of blogs ago, I tried to highlight the economic destruction California governor, Gavin Newsom, was inflicting on his once prosperous state by obessively pursuing economically-suicidal, Ed-Milibandesque Net Zero policies. I listed a few major companies which have started closing down their California operations. Since then, I’ve seen there are many more moving out of the state, for example Intel, Coca Cola, Shell and MacDonalds. These are not small companies and their departure will mean the loss of tens of thousands of jobs – Shell, for example, are reported to be closing around 1,100 gas stations. The exodus from California will also mean a massive loss of tax revenue for the state to squander on all its woke schemes.

But don’t worry, the California legislature has a cunning (Baldrick-like) plan. In November 2026, the Californian lawmakers will debate a proposed “Billionaires’ Tax”. Under the Billionaire Tax Act, Californians worth more than $1 billion would pay a one-time 5% tax on their total wealth. The California billionaire tax would apply to about 200 California billionaires who reside in the state. Roughly 90% of funds would go to healthcare and the rest to public K-14 education and state food assistance.

The tax would be retrospective in that it would apply to all assets held in the state on 1 January 2026.

Now, dear reader(s), what do you think has been the effect of this brilliant proposal?

• A: California’s billionaires have been jumping with joy at the opportunity to give more of their wealth to be squandered by California’s useless public sector?
• B: California’s billionaires are upping legal or even physical sticks and moving out of the state.

If you have the intelligence of a Gavin Newsom or our own lovable Rachel Reeves, you probably believe the outcome is – A. If you have even a semblance of a functioning brain, you’ll know the answer is obviously – B.

So far it has been reported that the following have been hitting the road:

• Google co-founders Larry Page and Sergey Brin
• Palantir co-founder Peter Thiel
• Oracle co-founder and Chief Technology Officer Larry Ellison
• DoorDash co-founder and Chief Technology Officer Andy Fang
• and quite a few others

Supporters of the proposal said the measure would raise about $100 billion and pushed back against the idea that billionaires would flee. “We see a lot of cheap talk from billionaires,” said UC Berkeley law professor Brian Galle, who helped write the proposal. “Some people do actually leave and change their behavior, but the vast bulk of wealthy people don’t, because it doesn’t make sense.”

Well, he would say that wouldn’t he? I just checked the political affiliation of Berkeley on Google and learnt: The University of California, Berkeley (UC Berkeley) is widely recognized as one of the most left-wing or progressive universities in the United States. It is renowned for its history of political activism, starting with the 1960s Free Speech Movement, and remains a liberal institution with a majority of students identifying as progressive. 

Student Body: A 2022 survey showed that over two-thirds of undergraduates described their political views as “slightly liberal,” “liberal,” or “very liberal”.

Political Reputation: Often called a “progressive bastion” or the “People’s Republic of Berkeley,” the campus is known for its strong liberal ideology.

Hey, lefties, what about the Laffer Curve?

You’ve all presumably heard of the Laffer Curve. The message from the Laffer Curve is that people don’t mind paying taxes up to certain level, especially if they feel they are getting value for the taxes they pay – good public sevices, crime-free streets, border enforcement, proper healthcare etc etc. But once taxes go above a certain level, people start to feel they are being fleeced and start changing behaviours. So increases in tax rates start to result in falling tax revenues. We had perfect examples of this in Britain:

• the Rachel Reeves NI jobs tax resulted in a collapse in hiring, an increase in unemployment and thus an increase in unemployment benefits which had to be paid. It has also pushed the UK into recession leading to falling company profits and thus falling tax revenues
• the Rachel Reeves 20% VAT on private schools led to 25,000 departures since the policy was announced, with many families citing the increased financial pressure as unsustainable. It would have cost the government about £8,000 per year per pupil when these 25,000 children returned to state schools – about £20m a year

Though, perhaps we shouldn’t blame Reeves for her blundering incompetence? Probably her budgets are are actually written by Torsten ‘tax-tax-tax’ Bell and Darren ‘they’re mostly women and children’ Jones.

The next major economy which is about to go down the ‘higher taxes, less revenue’ road to self-destruction is, of course, New York under its exciting new woke, left-wing, Religion of Peace mayor.

It’s extraordinary that Lefties don’t seem to understand that higher taxation eventually leads to falling revenues. And even more extraordinary that people keep voting for these lefty eejits when the result of their policies is predictably always economic devastation.