Nvidia CEO Jensen Huang, whose personal wealth is estimated to be around $200 billion, was recently questioned regarding California’s proposed wealth tax, a measure that has caused discontent among some billionaires.
“It’s fine,” he stated. “I haven’t given it a second thought.”
A significant number of billionaires are displeased with the efforts by “blue” states and municipalities to impose higher taxes on the ultra-wealthy. Silicon Valley titans like Sergey Brin and Peter Thiel are pouring millions into opposing California’s proposal. Financier Ken Griffin called Mayor Zohran Mamdani’s backdrop—a view of Griffin’s Manhattan penthouse during a video advocating for a pied-à-terre tax— “shameful.” Stephen Roth, the CEO of real estate behemoth Vornado, likened calls to tax the rich to a racial slur.
Yet, Huang represents a segment of the ultra-wealthy who are encouraging their fellow billionaires to dismiss the issue. Paying taxes, in his view, is “a way to give back,” he mentioned, jokingly suggesting the money should fund repairs for a specific pothole on Highway 101.
Tom Steyer also staked his campaign for California Governor on increasing taxes for people like himself: “I’m a billionaire who wants to tax other billionaires.”
The billionaire class is not monolithic, and their division reveals both political and generational fissures. It also reflects differing philosophies on governance.
Some older billionaires, such as Warren Buffett and Bill Gates, have long championed taxation for the super-rich as a civic duty. Many younger entrepreneurs, holding libertarian leanings, are skeptical of the government’s capacity to solve problems, believing they can allocate their funds more effectively themselves.
Peter Thiel and other Silicon Valley giants are funding efforts to circumvent California’s proposed wealth tax.
Peter Thiel and other Silicon Valley giants are funding efforts to circumvent California’s proposed wealth tax. Mathias Baletto/Reuters
While many affluent individuals throughout American history have felt personally targeted by government actions, this current moment feels distinct, commented Kimberly Phillips-Fein, a historian of capitalism and New York at Columbia University.
“Griffin, Roth, and others see the tax as a symbol of political hostility toward the wealthy,” she explained. They expect their contributions to be acknowledged and respected, and taxing the rich “feels like an unbearable personal insult” that questions their “moral virtue.”
However, wealth taxes or levies on luxury second homes are unlikely to bring about a fundamental restructuring of America’s top-tier tax code.
In reality, the existing tax system disproportionately targets high-salary earners—individuals who often differ from those holding the most wealth. America’s wealthiest pay a lower effective tax rate than the general populace: The fortunes of the top 25 billionaires collectively grew by $401 billion between 2014 and 2018, yet they paid a federal income tax rate of only 3.4%, as uncovered by ProPublica.
Progressive states like Washington, Massachusetts, and now California are attempting to raise taxes on the ultra-wealthy to mitigate income inequality and limit the concentration of economic and political power at the apex.
Nevertheless, for individual states, reforming tax structures carries risks, as individuals might relocate or establish businesses in lower-tax jurisdictions. Wealth taxes are also notorious for administrative complexity—valuing art, real estate, and intentionally complicated business partnerships proves difficult. Wealthy individuals have also developed sophisticated tax avoidance strategies.
“We live in a world heavily burdening workers, salaried people who pay high taxes. The wealthiest get a free ride,” observed Ray Madoff, a professor at Boston College Law School and author of The Second Class: How the Tax Code Created an American Aristocracy.
Taxing Income, Not Wealth
Opponents of taxing the rich frequently point out that the top 1% of income earners pay 40% of the income tax. Critics argue that if cities and states continue to raise taxes on the wealthiest, they risk destroying the “golden geese” funding public services.
This argument is a misdirection, Madoff contends. It overlooks that the wealth of most billionaires resides outside of taxable income. Many mega-billionaires, like Mark Zuckerberg and Elon Musk, draw salaries of $1 or no salary at all. Only about half of the families in the top 1% of the wealth distribution also fall within the top 1% of income distribution.
The fortunes of major billionaires are often tied to the appreciation of their stock holdings, which are taxed at lower rates than ordinary income. Yet, they devise methods to evade even these lower capital gains taxes by holding onto shares to defer payments or offsetting gains by selling other investments at a loss.
“Paying capital gains tax has become optional in our current system,” Madoff stated.
Many billionaires also benefit from inherited wealth, which is generally exempt from individual income tax under the assumption it will be covered by the estate tax system. However, revenues from the federal estate tax have stagnated over the decades due to loopholes.
In the absence of federal reform, states are striving to extract more revenue from the wealthiest. But new wealth taxes could backfire on them.
In 1990, twelve nations implemented wealth taxes; by 2024, only three remained. Some countries, like Sweden, abolished them to enhance their financial competitiveness, while others, such as France, discovered that the super-rich moved their assets abroad.
“States face a problem because they are competing against other states,” Madoff concluded. “The fight over taxing the wealthy is most effective at the federal level.”
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