What’s behind these wild new wealth-tax proposals?

Economist Veronique de Rugy issued a sharp critique on February 5, 2026, regarding new wealth-tax proposals in California, Illinois, and New York City, arguing that these measures fail to address the root cause of fiscal instability: uncontrolled government spending. As California voters prepare for a November ballot initiative proposing a one-time 5% tax on billionaires' net worth, and leaders in New York and Illinois explore similar levies on unrealized gains, de Rugy warns that these policies overlook the mobility of capital and the existing tax contributions of high earners. The push for these taxes serves as a political alternative to making difficult budget cuts in jurisdictions facing significant deficits, such as New York City’s $12 billion budget gap. The analysis highlights that wealth taxes are uniquely damaging because most billionaire wealth is held in illiquid assets, such as ownership stakes in businesses, rather than idle cash. Forcing the sale of these assets to pay a tax can trigger secondary capital gains liabilities and discourage the very investment needed for broader economic growth. De Rugy points to the historical failure of similar projects in Europe, where most wealth taxes were eventually repealed or narrowed due to disappointing revenue growth, administrative costs, and significant capital flight as the wealthy moved their assets to more favorable jurisdictions. Furthermore, the report suggests that the "one-time" nature of these taxes is often a fiscal illusion. When revenue inevitably falls short of projections due to the exit of high-net-worth individuals, policymakers frequently expand the tax to reach lower brackets of wealth rather than reducing expenditures. Ultimately, the burden of these policies may fall on the general workforce; while the wealthy are mobile enough to relocate, workers remain stationary and face fewer job opportunities and stagnant wages as productivity-driving investments disappear.