Money doesn’t buy happiness, we’re told. Even some economists agree. The Nobel Prize-winning economists, Daniel Kahneman and Angus Deaton, once proposed that rising income increased people’s emotional wellbeing only up to a ceiling of about $115,000 in today’s money.

They probably hadn’t met many billionaires. The ultra-rich may not pursue happiness in the joyful sense of the word. But they will try every trick in the book to hang on to their stash and woe befall the tax authority that tries to lay a finger on their treasure.

And this poses one of the most intractable challenges not only to the solvency of the American state, but to the survival of American democracy.

From the technological Olympus of Silicon Valley to the urban canyons of Wall Street, a narrow club of vastly wealthy plutocrats sits on a ballooning share of the nation’s resources. One percent of Americans at the apex of the economy are hoarding over 31% of the nation’s total wealth, a cool $55tn in net worth.

Getting them to share with the rest of society, to fund redistribution or pay for public goods, is proving pretty much impossible. Their ability to move resources around, hide profit across jurisdictions, and minimize income to hoard wealth until they die appears to put them beyond the reach of taxation.

One recent research paper found that the country’s richest 384 oligarchs paid only 24% of their economic income in 2025, compared with 30% for the average taxpayer. And not all of them are getting top notch tax advice. Reporting by ProPublica revealed that some of the richest Americans – like Elon Musk, Jeff Bezos, Warren Buffett and Michael Bloomberg – live largely tax free.

California is experimenting with a budgetary Hail Mary pass: In November, Californians will be called to vote on Proposition 40, a one-time 5% tax on the wealth of billionaires residing in the state on 1 January of this year. If the plutocracy’s income is off limits, the thinking goes, best to target its gargantuan assets.

California’s gambit is “the first-ever tax on billionaire wealth enacted anywhere in the world”– according to an open letter endorsing the move by six Nobel Prize-winning economists on the left side of the political spectrum. “It will kickstart a movement to tax ultra-high-net-worth individuals in other states – and eventually at the federal level and in other countries,” they raved. The vote “may well come to be seen as a turning point in the battle between democracy and oligarchy”.

Moreover, Prop 40 could raise real money. As of early October, 260 billionaires lived in the state, according to the Forbes billionaires’ list, amassing nearly $2.5tn in wealth. Based on these numbers, the 5% tax would raise some $110bn, much of which would go to replace Medicaid funding nixed in Trump’s One Big Beautiful Bill Act last year.

Still, the move is proving controversial even among left-leaning economists and politicians. Governor Gavin Newsom, who is virtually certain to run for the Democratic nomination ahead of the 2028 presidential election, is opposed. So is Xavier Becerra, the Democrat running to succeed him as governor. They fear that such a move will spark a flight of the oligarchs to lower-tax jurisdictions.

The Nobelists note that the California’s proposed billionaire tax was sneaked in to prevent billionaires from fleeing to avoid it: “Some affected taxpayers may have tried to leave between the time they learned about the proposed ballot initiative – in late November 2025 – and January 1st of 2026,” they wrote. “But the window was so short that it is unlikely any significant number of billionaires successfully cut ties with the Golden State in such a short period of time.”

In fact, between January and October the number of billionaires living in California grew by 20. Elon Musk may believe that welfare recipients are the “parasite class” and empathy is “the fundamental weakness of western civilization”. But perhaps California’s billionaires feel enough empathy for less fortunate humans to part with a paltry $110bn, especially since their wealth has grown by a cool $400bn so far this year.

Not all billionaires move to avoid taxes. Trump’s 2017 Tax Cuts and Jobs Act, which capped the state and local tax deduction, was expected to prompt the rich to flee high-tax blue states in droves, as they could no longer deduct their state and local tax payments on their federal tax returns. But a study by a Cornell sociologist and an economist at the treasury department found almost no impact on the migration rates of the affluent, at least in the first year following the change.

Indeed, the rich in New York City are hit by a top city income tax rate of 3.9% on top of a 10.9% state tax, compared with zero in Miami. Still, there are 154 billionaires in New York state, according to a report by Oxfam. Nine of the 10 richest live in the city. The only state with more billionaires than New York is, wait, high-tax California.

Still, Newsom and Becerra have a point. California’s richest billionaires have gone feral over Prop 40. Google’s Sergey Brin has helped coordinate some $200m to oppose it and promote two countervailing propositions, 41 and 42 that, if passed, would emasculate the tax. One would bar retroactive taxes – putting wealth accumulated in the past off limits – and forbid new taxes on financial assets or other personal property.

The opposition is gaining traction. A poll in September found that Prop 40 falls just short of majority approval. Just in case, the fast money has tried to flee the state, to make it out before deadline. In the run-up to Christmas of 2025 Brin and Google co-founder Larry Page moved many of their business interests out of California. They also bought homes out of state. Travis Kalanick, former CEO of Uber, left following Musk to Texas. Paypal and Palantir mogul Peter Thiel moved his residence to Miami last year.

While some of the more optimistic analyses assume that avoidance tactics by California billionaires will reduce the taxable pot of wealth by only about 10%, others are less sanguine. Even if it passes, the tax will be taken to court, including on grounds that retroactive taxation violates due process, and may not survive litigation. Some assets – real estate, notably – will not be taxed. Foreign billionaires may wiggle out under double taxation treaties. And more billionaires will leave, assuming that though it was billed as a one-time affair, the new tax will become permanent. This will hit future income tax revenues.

Altogether, economists from Stanford University concluded that the new tax would raise only around $30bn, while the flow of lost income tax revenue would cost state coffers nearly $39bn, in net present value. The estimate fits with results from studies of attempts to avoid wealth taxes in Swiss cantons. It also checks with behavioral responses of the rich to other forms of taxation. For instance, Enrico Moretti, an economist at the University of California Berkeley, and Daniel Wilson of the Federal Reserve Bank of San Francisco, found the location of the very rich is highly sensitive to estate taxes.

These should be the most American taxes of them all, a good fit for a democratic nation that conceives itself as a meritocracy; a tool to prevent the emergence of a hereditary aristocracy passing economic and political power down the generations. Still, the rich don’t much care for them.

In 2001, George W Bush did what Republican presidents do: he cut taxes. But his Economic Growth Tax Relief and Reconciliation Act included an annoying twist: it eliminated the credit offered by the federal government to offset the estate tax burden imposed by states on the ultra-wealthy. All of a sudden, billionaires’ estate tax liability became dependent on which state they lived in. Dying as a resident of New York, Pennsylvania and Connecticut, which had estate taxes, abruptly become way more costly than dying in a state with none, like Texas, Florida … or California.

By 2010, over a fifth of billionaires in the Forbes 400 list who originally lived in a state that levied an estate tax state had moved to a non-estate tax state, while only about 1% had made a move in the opposite direction. Moretti and Wilson estimated that by 2017 states with estate taxes had lost 23 of 72 Forbes 400 billionaires who lived there in 2001. Altogether, Forbes 400 wealth subject to state estate taxes fell from some $203bn in 2001 to about $122bn 16 years later.

States with estate taxes didn’t just lose the income tax revenue of their departing billionaires. Extra losses not considered in Moretti and Wilson’s analysis include the effect of plutocrats relocating their businesses. Moreover, estate taxes could well deter other billionaires from moving into the state, or encourage those who remained to try more aggressive tax avoidance strategies than usual.

In light of the difficulties in taxing billionaires and even the lesser rich, there is an argument out there that a less progressive, flatter tax structure could do better at raising money. European countries fund a large share of their generous welfare programs with value added taxes on consumption, which are more difficult to avoid but place a heavier burden on lower-income people who consume a larger share of their paychecks.

And yet the idea of letting plutocracy off the hook seems unacceptable. Brin has said Prop 40 reminds him of the Soviet Union, which he fled with his parents in 1979. Apparently he prefers a social arrangement more like the one that prevailed in the Czarist Russia in which a narrow few amass vast riches unencumbered by a responsibility to contribute to societal wellbeing. That’s the America we all live in now.

If American democracy is to survive this moment, it must figure out a way for billionaires to contribute more. It is essential not just to fund the public goods the nation needs to function. It’s indispensable to restore a sense of fairness to the American experiment. Democracy cannot endure without it.

Let’s see what happens next month in California. But the hard truth for blue states eager to raise more revenue to fund the social safety net and pay for public goods is that they are not up to the task, given competition with Republican-run states where taxes are anathema. As Moretti points out, the tax gap between red states and blue states has become enormous. California’s top marginal rate is 13.5%. Florida’s is zero. The temptation for the next Czarist plutocrat to move from the first to the second is not insignificant.

Indeed, Moretti and Wilson have another research paper that looks at what top scientists and engineers do when states raise income taxes. “People do leave,” Moretti told me. “These are not billionaires, but only highly paid workers.”

The good news is that while there are many ways in which California’s attempt at taking a nibble out of billionaires’ wealth may fail, it is not technically impossible to tax the oligarchy. There are various options available. Federal estate tax rules could be cleansed of the myriad loopholes that allow dynastic wealth to accumulate, such as those allowing unrealized capital gains to accrue forever tax free and bequeathed to heirs with the gains reset to zero. Taxes on capital income could be raised to restore fairness between taxation on capital and labor.

Economists Erick Zwick of the University of Chicago and Owen Zidar of Princeton propose that restoring the tax schedule to where it was in the Clinton administration 30 years ago would raise $5tn over a decade and do wonders for America’s public finance. The main challenge to that is political: it requires an overhaul of a political equilibrium that over the last 50 years has largely revolved around cutting taxes.

But restoring fairness and efficacy to the American state is in the end not a task for the states. Altogether, the government collects almost 3% of GDP less in taxes than it did at the turn of the century. Over 2% of that decline was about federal revenues. The average central government in the Organization for Economic Cooperation and Development today raises twice as much in taxes, as a share of GDP, as the US federal government.

Fixing this is, of course, a political problem, one that will remain intractable as long as half of the political spectrum believes its only job on this earth is to cut taxes. But it would be helpful for the fleet-footed billionaires to give some thought to the social contract in which they want to live; whether they are interested in broad-based prosperity or, rather, they are happy to slink into their castle, raise the drawbridge, and hope societal upheaval does not interrupt dinner.