California is considering imposing a "wealth tax," which is among the dumbest ideas out there. 

Doing so anywhere is stupid, but doing so in a state whose economy especially depends on investments in new ideas, building startups, and creative destruction (most startups fail, but may have high notional values as people put money in to help them get off the ground). 

Wealth, for most people, is bound up in unrealized capital gains of some sort or another. Few people have their net wealth hanging around in cash. It's tied up in property, businesses, investments, and other assets. 

Wealth is not income or money, and that's a good thing. Wealth should be working to make your portfolio, and by extension, the economy, grow. 

California's proposed wealth tax summarized:

The proposed California wealth tax, known as the 2026 Billionaire Tax Act (Initiative No. 25-0024), targets a one-time levy on high-net-worth individuals. It would apply to California residents or part-year residents as of January 1, 2026, with net worth over $1 billion (phasing out up to $1.1 billion).

Key Features

• Imposes a 5% tax on net worth as of December 31, 2026, covering assets like stocks, businesses, art, collectibles, and intellectual property, but excluding personally owned real estate, pensions, and retirement accounts.

• Payment due with 2026 income tax return in 2027; option to pay over five years with 7.5% annual nondeductible interest on balances.

• Apportionment: Standard method assumes 100% to California; alternative minimum 25% if wealth accumulation elsewhere.

Revenue and Use

Estimated to raise $100 billion or tens of billions (exact amount uncertain due to asset volatility and behavioral responses). Funds go to a special account: 90% for public health care, remainder for tax administration, education, and food assistance (bypassing general fund rules like school funding).

The Dutch lower House has just voted for what amounts to a huge wealth tax on unrealized capital gains, and if anything, it is a worse idea than California's supposedly one-time 5% wealth tax, which has already driven some of the wealthiest entrepreneurs out of the state. It will likely pass the Senate and become law. 

Rather than a one-time (supposedly) seizure of wealth, which is bad enough to potentially destroy the startup market in California and drive new investment and productive people out of the state, the Dutch just voted to impose a YEARLY 36% tax on unrealized capital gains. While the amount seized from an investor in any given year will likely come out to less than California's seizure, the cumulative effect on investors and the economy could turn out to be much worse. 

Taking a page out of Ross Perot's playbook, Parliament Member Michel Hoogeeen explains how the tax will work:

NEW: Dutch Parliament Member Michel Hoogeveen explains how the 36% unrealized capital gains tax, just passed by the House of Representatives, will work.

Here is a more detailed example:

Step 1. Starting position
You own 500 shares.

Value on Jan 1, 2028: €50,000
Value on Jan… pic.twitter.com/GYeAN9jlJ6

— Bitcoin News (@BitcoinNewsCom) February 12, 2026

Here is a more detailed example: 

Step 1. Starting position

You own 500 shares.

Value on Jan 1, 2028: €50,000

Value on Jan 1, 2029: €100,000

So the paper gain is:

€100,000 − €50,000 = €50,000 unrealized profit

You did not sell. But for tax purposes, that €50,000 is treated as income.

Step 2. Apply exemption

You are married, so you get a €3,600 exemption.

€50,000 − €3,600 = €46,400 taxable amount

Tax rate: 36%

€46,400 × 36% = €16,704 tax bill

That bill is due in May, even though you never sold anything.

Step 3. Market falls before you pay

Now suppose by May the shares drop in value.

New total value: €60,000

So your portfolio is no longer worth €100,000. It’s worth €60,000.

But the tax bill is still €16,704, because it was calculated based on the January 1 valuation.

Step 4. You must sell shares to pay tax

To raise €16,704, you sell part of your shares.

After paying the tax, you’re left with:

€60,000 − €16,704 = €43,296

Originally you had 500 shares.

Now you have 360 shares left.

You were forced to sell 140 shares.

140 ÷ 500 = 28% of your shares gone.

Step 5. What happened economically?

Before the correction:

Paper gain was €50,000.

After the correction:

Portfolio is worth €60,000.

Original cost basis was €50,000.

Real gain is only €10,000.

But you paid €16,704 in tax.

So instead of being up €10,000, you are now:

€43,296 − €50,000 = €6,704 below your original starting value.

You turned a €10,000 real gain into a €6,704 net loss.

And you lost 28% of your shares permanently.

It's pure wealth destruction, not just for the investor, but for the economy as a whole, because total investment will go down and be transferred to the government for spending, often on very unproductive activity. Instead of being used to expand the economy, money is being consumed by welfare payments and gifts to NGOs. 

To call this economic insanity is an understatement. 

Sad day in NL, the Dutch government is expected to pass a bill introducing a 36% tax on unrealized capital gains.

This will destroy long-term strategies, kill compounding effects & trigger a wealth exodus of biblical proportions.

But they'll pass it anyway. Can't fix stupid.

— Jelle (@CryptoJelleNL) February 12, 2026

Now, the Netherlands is and has long been a very wealthy economy and a very attractive place for multinational companies to settle. Having a policy like this will not, by any means, make the country poor, but it will drive capital out and slow the economy over time. The most productive and most likely to invest citizens will pack up and leave, investment will dry up, and the slow strangulation of growth will make it relatively poorer and poorer over time. 

This is eating your seed corn, which is never a good idea, and is downright insane when there is no need to do so other than wanting to spend money on luxury. 

The Dutch economy is already facing slow growth, which is likely one of the reasons the government wants to take even more money, and this can only hurt. While it does reasonably well compared to its European peers—it exports a lot of oil—its biggest trading partners are facing strong economic headwinds themselves. 

This is how countries kill themselves. 

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