What they're not telling you: # Exit Taxes Won't Save Failing States: A Confession Written Into Tax Code The states proposing exit taxes are admitting they would rather punish departure than fix the conditions that drive it. When a state legislature starts floating an exit tax, it is broadcasting something no fiscal analyst needs to decode: the underlying economic model is broken, and the people managing it know it. California's billionaire net-worth tax proposals, New York's surcharge on high-value second homes in Manhattan, and Washington's enacted millionaires' tax all telegraph the same message in slightly different dialects.
What the Documents Show
Lawmakers are choosing confession over reform. The framing matters because it obscures what's actually being taxed and who's actually being targeted. Vance Ginn's analysis cuts through the rhetoric of "fairness" and "responsibility" to identify the core problem: these proposals treat wealth as fungible cash waiting to be skimmed, when wealth in the hands of entrepreneurs and investors is typically illiquid—locked into business equity, unrealized securities gains, real property holdings, and future earnings streams. When you tax net worth or unrealized gains, you are not taxing idle money. You are forcing asset sales, triggering capital gains recognition events, and creating cascading tax liabilities on paper gains that may never materialize as spendable income.
Follow the Money
The political economy here is instructive. States that have allowed spending commitments—particularly unfunded pension liabilities and public sector compensation packages negotiated in earlier eras—to grow faster than their revenue bases have painted themselves into a corner. Rather than confront structural spending problems, they reach for confiscatory taxation on the mobile, the wealthy, and the entrepreneurial. This is a wealth confiscation strategy dressed up as progressive taxation. What the mainstream framing misses is the specificity of who actually leaves when these policies are enacted or seriously proposed. It is not primarily retirees or passive investors.
What Else We Know
It is business founders in their productive years, wealth creators who have already demonstrated the capacity to build value, and the corporations and jobs that orbit their presence. When California signals that it will tax unrealized gains, it is not threatening someone living off inherited wealth in a trust. It is threatening the founder of a software company whose equity stake has appreciated but who has not yet had a liquidity event. That founder faces a choice: stay and become a tax collection mechanism for the state, or relocate to Texas, Florida, or Nevada and retain the upside. The tax design matters too. Ginn notes that these proposals differ in form but not in spirit—they are all designed to claw back revenue from departing wealth.
Primary Sources
- Source: ZeroHedge
- Category: Money & Markets
- Cross-reference independently — don't take our word for it.
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