Jim Brulte: Finally, something Gavin Newsom and I agree on

The governor is starting his eighth and final year in office, and I have finally found an issue upon which he and I actually agree.

Gov. Gavin Newsom and I agree that the Service Employees International Union—United Healthcare Workers West proposed 5% wealth tax on California billionaires is not in California’s long-term best interest.

Here is what Gov. Newsom and I both know:

First, there is nothing more mobile than very rich people and their money.

Second, when one extraordinarily rich taxpayer leaves our state, it takes way too many new California taxpayers just to make up the lost revenue for the state general fund.

Third, if the wealth tax passes it creates one-time money that will likely be spent for ongoing programs: much like the capital gains and stock option income from the tech industry in 1998-99. But that one-time money will go away just like it did in 2000 when the Nasdaq crashed.

I actually know and admire the leader of the union pushing the wealth tax. He is extremely smart. He also knows that once a state program is funded, it almost never gets terminated. I am sure he is betting that when the one-time money runs out, the legislature will find someone else to tax to fill the budget hole. And that someone else will be middle-class taxpayers.

I served as the Republican Leader in the California State Senate from 2000-2004.

When then-candidate Schwarzenegger was running for office, I asked my staff to see what they could find out about him.

Using the best public information available, they estimated that in 2001, Arnold paid $1.9 million in state income taxes. (Forgive me governor if my staff underestimated your income.)

I then asked them to tell me how many new jobs needed to be created to offset the revenue loss if Arnold left our state.

According to the US Department of Labor, the state’s average annual wage in 2002 was $39,640. The Institute on Taxation and Economic Policy estimated the average Californian in this tax bracket paid 1.7 percent (or approximately $674) in state income taxes.

So, if rather than running for governor, Arnold had left our state, the state would have needed to create 2,854 jobs paying average wages to make up for lost revenue.

If five individuals with similar incomes to the governor had left the state, California would have needed to add 14,268 jobs to replace the $9.5 million in lost revenue.

And that was in the early 2000s before California’s top income tax rate was raised a full point to 13.3%.

It’s no wonder entrepreneurs like Elon Musk moved out of our state years ago.

The wealth tax proposal is causing others to also look to  the exit.

Recently, the news media has reported that Google co-founders Larry Page and Sergey Brin have moved out of our state after decades of living here.

According to the New York Times his Google co-founder Sergey Brin terminated or relocated 15 California limited liability companies (LLCs) out of California before the end of last year.

Page and Brin are not alone, with PayPal co-founder Peter Thiel is looking to move out of the state as is Craft Ventures’ David Sacks, among others.

It was also reported in the media that at least 10 California billionaires moved out of the state before the end of last year.

As Gov. Newsom and I both agree, this “wealth tax” is unbelievably bad policy and it should never become law.

The cost will simply be too high for California.

Jim Brulte served as the Republican Leader in the Assembly from 1992-1995 and Republican Leader in the Senate from 2000-2004. He also served as chair of the California GOP from 2013-2019.