Welcome to The New Pragmatic!
New politics for pragmatic people. That’s what we’re building. We’re a Republican and a Democrat with strong opinions, different perspectives, and a shared belief that politics should be about outcomes, not outrage. We’re not mushy centrists looking to split the difference. We’re interested in good ideas, honest debate, and solutions that actually work.
Through our YouTube show and this newsletter, we’ll tackle current issues, share our perspectives, challenge each other’s thinking, and invite you to do the same.
Our goal isn’t to tell you what to think. It’s to create a space where we can debate, disagree, share ideas, and figure a few things out together.
We hope you enjoy our first edition and join us for many more conversations to come!
This edition is about Proposition 40, the California Billionaire Tax. Let’s get into it!
— Amanda & Jay
(Almost) Everyone Hates the California Billionaire Tax
by Jay Cheng
In case you haven’t seen the $350 million in political ads: there’s a Billionaire Tax on the California ballot this November.
Prop 40 would impose a one-time 5% tax on all California residents worth a billion dollars or more. It would raise somewhere between $40 billion and $100 billion, with 90% going to healthcare and 10% going to education. It’s sponsored by SEIU-UHW, a labor union of healthcare workers.
It’s a very straightforward eat-the-rich measure for a very eat-the-rich time.
What’s shocking about the explicitly populist Prop 40 is how many people hate it.
Conservatives hate it for the usual reasons: it punishes success, it increases taxes, the unions will start with billionaires and then come for us all. (I don’t mean to be glib; these are valid arguments.)
Moderate Democrats oppose it for more rhetorically complicated reasons: it drives billionaires (and future billionaires) out of the state, and takes their investment, spending, and economic activity with them. This argument is, functionally, the Will Smith song “I’m Going to Miami.”
Gavin Newsom represents this cohort best. The poor man, trapped in a prison of his own political ambition, has been put in a terrible position by the California Billionaire Tax. His 2028 presidential aspirations demand economic populism and a tax-the-rich platform to win the Democratic Party nomination. But the need to preserve his state’s tech-based economy (and avoid upsetting a rather large cohort of major donors) demands that he oppose Prop 40.
His thread-the-needle answer is to say he DOES support a billionaire tax, just not THIS one. A state-specific billionaire tax will just drive the wealthy folks and their wallets into other states, depriving California of much-needed economic activity. But a national Billionaire Tax that applies to all 50 states? Sign him up.
It’s a painfully convoluted answer with the unusual trait of also being accurate and intellectually defensible. Someone give his political team a raise.
I personally hate Prop 40 because it introduces a completely new form of taxation. Most taxes in our country are based on transactions: money changes hands, and you get taxed. Sales taxes happen when you trade money for goods. Income taxes happen when someone pays you for your work. And so on.
We’ve never really had a tax that said: Let me take an inventory of everything you own at an arbitrary point in time, and give me a portion of it. I find that outrageously abusive. You’ve already paid taxes when you purchased your home (transfer tax), taxes for continual maintenance and public services to your home (property taxes and parcel taxes), and a dozen other little taxes in that vein. What’s the rationale for an additional one-time tax on your home as part of your net worth, especially if you’re not cashing out on it?
It gets even worse when you consider unrealized capital gains. Extending the logic of this taxation: Your 401(k) holds a stock portfolio that has risen in value (through no fault of your own), a one-time tax on assets will suddenly take 5% of your retirement savings. To have enough cash to pay the tax, you’ll probably need to sell stock early. To afford the tax on things you own, you’ll end up selling the things you were taxed on in the first place.
Of course, none of this is that big a deal if it applies only to the 200 to 250 billionaires in California, who can undoubtedly afford it one way or another. But as my colleague Amanda Blackwood says, there’s really no such thing as a temporary tax in California, and no tax ever applies only to the rich. I have full faith in the productivity of our Sacramento politicians and special interests. I know that once they see Prop 40 succeed, they’ll be eager to apply this new tax regime to the rest of us.
The polling (and spending) suggests that Prop 40 is headed toward defeat (although it will be tight). The opposition campaign has outspent the proponents by 10x, and the latest polling reported by Politico has it at 46% Yes, 40% No, with 11% undecided. Conventional political consultant wisdom holds that if your ballot measure is polling below 50% heading into Election Day, you’re going to end up below 50% on election night (no matter how many voters were undecided).
But I doubt this is the last time we’ll see a Billionaire Tax in California. Because the California Teachers Association also hates Prop 40…mostly because it doesn’t give teachers a big enough cut of the revenue. Inevitably, some interest group or public sector union is going to bring this idea back in 2028, and it’ll be written to benefit more than a narrow slice of public healthcare workers.
Prop 40: They Are Coming for You Next
by Amanda Blackwood
Taking action to deal with the staggering cost of healthcare is a noble quest - one that most Californians support. Asking people that have more money than we could ever imagine to help make California affordable is appropriate. And believing that The Elon Musks of the world are insufferable douchebags that should at minimum write a couple of checks to help out a state that has done very well by them is completely reasonable.
But sweeping tax policy that sets the stage for future populist cash grabs with a fickle, tax crazy legislature is not the answer and will do very little to make the massive complex that is US healthcare any cheaper.
Bad policy doesn’t become good policy just because the target is unpopular. And a government that can’t resist making temporary taxes permanent has done absolutely nothing to earn our trust with an entirely new way to tax wealth. Prop 3 is literally on the same ballot and is this exact thing - a temporary tax for the “rich” to solve an intractable problem that because we hate them - we are now trying to make permanent.
We should never make policy out of spite or anger or jealousy. We should make it because it is right and actually provides a real and meaningful solution to the problem we are trying to fix. Prop 40 is not sound tax policy. It’s populist policy fueled by legitimate frustration over economic inequality and shrinking opportunity. And as that frustration grows, so will the political appetite to redefine who’s “rich.”
Today it’s billionaires. Next time, who’s to say it won’t be business owners or homeowners?
So vote angry if you want but I assure you - the real rich will find a way to avoid paying it and the next tronch of whoever is the new rich - business owners, homeowners including retirees on fixed incomes, and people with book assets like stock but no actual cash - will be the group that gets handed the bill. If not through Prop 40 directly than through some new version of it (looking at you California Teachers Association) that will spawn from this flawed precedent.
If you’re tired of healthcare premiums being out of control - then let’s fix it - not hand an invoice to people that we want to punish for having more than we do.
If you think Sacramento will stop at billionaires, I’d suggest you haven’t been paying attention.
Proposition 40 is a billionaire tax. Will it work?
Amanda and Jay did a full episode on it on KFBK Sacramento News Talk Radio two weeks ago. Listeners called in, Jay and Amanda debated whether billionaires are paying their fair share, and we asked the $40 billion question: If we raise the taxes, will the billionaires leave? Watch the episode:
You can also listen to the audio version on Substack here, and keep an eye out for us on your favorite podcast app soon.
Thanks for reading The New Pragmatic: New politics for pragmatic people. Read us at TheNewPragmatic.com, follow us on X, Instagram, and TikTok, and watch or listen on Youtube.You can email us at jay@thenewpragmatic.com and amanda@thenewpragmatic.com.