Billionaire entrepreneur Don Hankey has publicly criticized California's proposed wealth tax, Proposition 40, calling it economically nonsensical after relocating to Las Vegas to avoid its potential impact. Hankey, whose business interests span real estate, insurance, and auto loans, stated that he felt unwelcome in California and that the state was driving away wealthy residents and their investments.
Hankey confirmed his move occurred in December, just before the residency deadline for the proposed tax. He expressed concern that California is sacrificing significant income tax revenue by alienating its wealthiest citizens. "It just economically makes no sense to me," Hankey told The New York Post. While his company's headquarters will remain in Los Angeles, he noted a growing presence in Las Vegas, citing fewer potholes as a minor perk.
His departure comes amid warnings from over 100 economists, including Nobel laureates and former government advisors, who have cautioned that the wealth tax is already prompting the wealthy to leave California. A Stanford study indicated that at least seven billionaires, representing about 30% of the state's billionaire wealth, have severed ties with California due to the proposed tax. These economists argue that wealth taxes are particularly vulnerable to capital flight because the tax base is highly mobile.
The economists also raised concerns about the tax's potential legal challenges, including its retroactive reach, interstate taxation issues, and constitutional limits on taxing intangible property. They also highlighted the practical difficulties in valuing illiquid assets like privately held businesses.
Supporters of Proposition 40, including SEIU-United Healthcare Workers West, argue that the tax is necessary to fund essential health care and other services, and to counteract potential federal cuts. They contend that billionaires have benefited immensely from the state and should contribute more.
However, opponents, including the California Business Roundtable, are preparing legal challenges if the proposition passes. Governor Gavin Newsom has also expressed opposition to the wealth tax, advocating instead for a national tax on the wealthy and emphasizing the need to protect citizens' savings.
Recent polls show a tight race for Proposition 40, with some indicating slipping support. The outcome could also be influenced by two other measures, Propositions 41 and 42, championed by Google co-founder Sergey Brin, which could potentially invalidate key aspects of the wealth tax if they garner more votes.