Two Confusions About the California Wealth Tax

Unrealized capital gains aren’t classified as taxable income in the U.S. for good reason

Letter to The WSJ. 

"At least two confusions discredit Mayra Castañeda’s attempted defense of California’s proposed wealth tax in her letter “Billionaire Tax Would Save Calif. Healthcare” (Feb. 4). She claims that “billionaires pay less in taxes on their overall wealth than working families do.” She gets away with this because the research that she cites, although it postures as measuring the taxation of incomes, in fact measures the taxation of paper wealth by classifying unrealized capital gains as taxable income.

But unrealized capital gains aren’t classified as taxable income in the U.S. for good reason. Were these gains treated as such, taxpayers—including many middle-class families—would have to liquidate assets whenever tax season rolled around to pay their bills. One result, in addition to this annual hardship, would be a shrinkage of America’s capital stock which, in turn, would slow wage growth as workers, having less capital to work with, would be less productive than otherwise.

Ms. Castañeda also ignores the most prominent argument against the proposed tax—namely, that it will drive billionaires, along with their taxable incomes and wealth, to states that are less greedy to seize the fruits of high-earners’ efforts. This exodus of billionaires would occur even if, contrary to fact, counting unrealized capital gains as taxable income were a sound idea.

Prof. Donald J. Boudreaux

Mercatus Center

George Mason University" 

Declining labor share is sometimes attributed to businesses underpaying workers. In fact, it is more due to a shift in the sorts of businesses that dominate the economy.

See The Big Money in Today’s Economy Is Going to Capital, Not Labor by Greg Ip. Excerpts:

"Declining labor share is sometimes attributed to businesses underpaying workers. In fact, it is more due to a shift in the sorts of businesses that dominate the economy. Today’s fastest-growing “superstar” companies pay well, but don’t have many workers. In the past three years Google parent Alphabet’s revenue has grown 43%, while head count has remained flat. Amazon is a major employer because of its fulfillment centers, but even it is eliminating jobs.

In such companies, the line between capital and labor blurs. Employees who design the technology are a form of human capital, and are compensated in stock to reflect that. Some corporate acquisitions dubbed “acquihires” are aimed primarily at talent, such as when Meta Platforms paid $14 billion for a stake in Scale AI to nab founder Alexandr Wang."

"Households’ stock wealth is now equal to almost 300% of their annual disposable income, compared with 200% in 2019. At such levels, wealth starts to rival wages as the driver of consumption, at least for the affluent households who own most stocks.

Doug Peta, a strategist with BCA Research, estimates that a 10% stock return, including dividends, taxed at the highest marginal rate, boosts spending capacity as much as an 18% rise in income. No wonder tepid job and income growth aren’t holding back the economy."

Trump’s Climate Liberation Act

Removing Obama’s ‘endangerment’ finding makes it harder to ban fossil-fuel energy

WSJ editorial. Excerpts:

"in 2007 a 5-4 majority of the Supreme Court ruled in Massachusetts v. EPA that greenhouse gases qualify as pollutants under the Clean Air Act."

"greenhouse gases aren’t toxic and don’t affect air quality, unlike pollutants that the law expressly directs the EPA to regulate."

"The impact of greenhouse gases on global temperatures is intermediated by such factors as cloud cover and urbanization, and the effect on storms is disputed. In any event, curbing CO2 emissions in the U.S. will have scant impact on climate because emissions are rapidly rising in China, India and developing countries."

"The Great Scalia observed in dissent that “regulating the buildup of CO2 and other greenhouse gases in the upper reaches of the atmosphere . . . is not akin to regulating the concentration of some substance that is polluting the air.”"

"the endangerment finding also violates the Supreme Court’s major questions doctrine."

"express authorization from Congress is required for economically and politically significant executive actions. A 6-3 majority invoked the doctrine in West Virginia v. EPA (2022), which struck down the Obama-era CO2 emissions limits for power plants."

Why Unemployment is Rising Among Young College Grads

Their skills, experience and ability to function are increasingly out of step with employers’ needs

By Allysia Finley. Excerpts:

"last . . . unemployment among college grads age 22 to 27 rose to 5.6% in December, roughly what it was in February 2009 during the financial panic." 

"Artificial intelligence isn’t taking their jobs. Young grads’ struggles started before AI went mainstream. Between 1990 and 2014, unemployment for young college grads was generally 1 to 3 percentage points lower than for all workers. The gap started to tighten around 2014 and reversed in late 2018. Unemployment for young college grads is now about 1.4 points higher than for all workers."

"Government subsidies and public schools have funneled too many young people to credential mills, which churn out grads who lack the skills that employers demand."

"More than half of high-school grads matriculate to college, even though only 35% of 12th graders score proficient in reading and 22% in math on the National Assessment of Educational Progress."

"U.S. colleges awarded 2.2 million bachelor’s degrees last year, about twice as many as in 1990. That’s also double the number of associate’s degrees. Another 860,000 Americans last year received a master’s degree, nearly triple the 1990 figure. Nearly 40% of Americans with a bachelor’s now have an advanced degree."

"Colleges have added graduate programs in fields like urban planning, sustainability and fine arts to rake in more federal dollars."

"market that is saturated with heavily credentialed workers."

"Many skated through college by relying on AI to do their work."

"Some also struggle with executive functioning because of disability accommodations in high school and college that allowed them extra time to complete tests and assignments. More than 20% of undergrads at Harvard and Brown and 38% at Stanford have registered disabilities."

"31% of small-business owners had job openings they couldn’t fill, compared with a historical average of 24%." 

The problems with government mandated healthcare technology

See ‘A Giant Leap’ Review: Disruption for Doctors: Digital innovation in healthcare has proceeded in fits and starts. Will generative artificial intelligence solve more problems than it creates? by David A. Shaywitz. He is a lecturer at Harvard Medical School.

He reviewed the book A Giant Leap: How AI Is Transforming Healthcare and What That Means for Our Future by Robert Wachter. Excerpts:

"Health-policy wonks in the Obama administration tucked $30 billion into the 2009 stimulus package to accelerate EHR adoption, a move that had unanticipated consequences. The problem, Dr. Wachter points out, was that EHRs provide a mechanism for “hospital administrators, regulators, and payors” to “shape what the doctor did in real time,” generating ever more tasks requiring ever more documentation.

The introduction of patient-communication portals added another burden, creating a torrent of messages with “no workforce, workflow, or business model to sustain it,” and forcing doctors to work increasingly late hours. Healthcare systems responded by hiring more administrative staff to manage the paperwork, and more nurse practitioners to take on clinical tasks."

"He offers a useful outline of digital transformation: digitization, integration, analysis and finally acting on insights to change behavior. He argues that healthcare remains maddeningly stuck at Step 2, as practitioners struggle to connect siloed information. Such work can be “brutally difficult,” he writes, because “trying to get data from health systems or insurers often feels like dragging an anchor through the sand.”" 

How a $30 Billion Welfare Program Became a ‘Slush Fund’ for States

Republicans and Democrats alike decry the lack of oversight for America’s famous antipoverty experiment. ‘Fraud by design.’

By Cameron McWhirter, Dan Frosch and Scott Calvert of The WSJ. Excerpts:

"Temporary Assistance for Needy Families, or TANF, has long been plagued by poor financial oversight and questionable spending in states led by both Republicans and Democrats.

"Auditors in numerous states . . . . have uncovered problems with TANF"

"TANF funds flow annually through block grants to states, which have wide latitude to spend them and minimal reporting requirements—a structure critics say hampers oversight."

"States now award most of the money to nonprofits, companies and their own state agencies. An average of about 849,000 families got direct cash aid each month in fiscal 2025, federal data shows, down from about 1.9 million in fiscal 2010."

"states inaccurately reporting large expenditures and disbursing millions of dollars to contractors without tracking how the cash was spent."

"states  . . . have directed hundreds of millions of dollars to programs with tenuous—or no—connections to TANF’s goals."

"college scholarships that benefited middle- or upper-income families, antiabortion centers, a volleyball stadium in Mississippi, and an Ohio job-training nonprofit where leaders and employees were later sentenced to prison after prosecutors said they used TANF money for vacations, real estate and salaries for people who didn’t work there."

"the GAO identified 37 states where recent audits found 162 deficiencies in financial oversight, “56 of which were severe.”"

"“opaque accounting practices”"

"States often use TANF money as a “slush fund” to plug budget shortfalls and finance initiatives that don’t help poor people"

"The most prominent scandal involving TANF funds, at least $77 million, took place several years ago in Mississippi."

"officials have often failed to track where the money goes or whether it is spent properly."

"Louisiana . . . state employees didn’t verify or document the hours worked by some TANF enrollees"

"hadn’t accurately documented TANF distributions to contractors."

"In Connecticut, auditors said the state in 2024 didn’t sufficiently review the financial reports of 131 subcontractors who received $53.6 million in TANF funds"

"states don’t have to spend all their TANF money in a single year, and many have built up large surpluses. In times of fiscal pressure, such as the 2007-09 recession, many states used TANF funds for purposes that had little to do with the program’s original goals"

"Several states have also used TANF money for programs available to people well above the poverty threshold.

Between 2011 and 2024, Michigan faced criticism for pumping more than $750 million in TANF funds into two college scholarship programs that aided many students from middle-income and even affluent families" 

Stop Worrying, and Learn to Love Industrial Food

See We Shouldn’t Want to Eat Like Our Great-Great-Grandparents by Dr. Dutkiewicz and Dr. Rosenberg are the authors of the forthcoming book “Feed the People: Why Industrial Food Is Good and How to Make It Even Better.” From The NY Times. Excerpts:

"But before you hurl that bagel into the trash, consider that it represents much that is good about our food system: It is affordable, convenient and nutritious. Virtually all the food we eat, junk and vegetables alike, is part of an industrial system. Acknowledging that fact and embracing the system’s scale, reliability, safety standards and abundance is a far better path to improving it than chasing a fantasy of Edenic premodern food that never existed.

Your morning bagel is, in fact, a small miracle made possible by conventional, mass-produced and enriched ingredients, like flour and salt. At the turn of the 20th century, when our great-great-grandparents had no choice but to eat “real food,” malnutrition was rampant. Anemia was common, as was iodine deficiency, which could cause a disfiguring swelling of the thyroid gland known as a goiter; in one Michigan county on the eve of World War I, nearly a third of potential Army recruits were rejected because of such thyroid problems. Enrichment — such as the addition of iron to wheat flour and iodine to salt — and easier access to grain and fresh produce, made possible by productive industrial farming, reduced anemia and virtually banished not only goiters but also illnesses like rickets, scurvy and pellagra.

Perhaps you want a slice of tomato on that bagel? If it’s January on the East Coast, it won’t be local. Your tomato will come from Florida or, more likely, Mexico, where it will have been grown on high-yield farms using conventional fertilizers and pesticides. Want it organic? It will still take industrial supply chains to get it to you. Shunning those globe-spanning supply chains in favor of sparse and often more expensive local and seasonal alternatives is likely to result in everyone eating less produce.

Adding fruit will make your breakfast even healthier. Here, too, modern food technology can help. Half a century of worry about the safety of genetically modified organisms, or G.M.O.s, often derided as “frankenfoods,” has not yielded a shred of compelling evidence that they endanger human health. The genetically modified Rainbow papaya, which is resistant to the ringspot virus, saved Hawaii’s papaya crop. Arctic apples from Washington State, genetically modified to brown more slowly, reduce food waste."

"the idea that ultraprocessed foods are categorically unhealthy is an oversimplification." 

"many ultraprocessed foods, such as yogurt, whole-grain bread or ready-to-eat plant-based burgers, are not linked to worse health outcomes and may even be beneficial."

"dumping industrial food from your plate would do little to change things for the better and, in some cases, would actually make it worse. Food that is local, organic and low-tech is vastly more expensive than food grown through conventional methods. There is little evidence that it is healthier. And when it comes to environmental impact, it matters much more what is produced than how it is produced; tofu is going to have a smaller ecological footprint than beef. That holds true even if the tofu comes from soybeans grown on giant farms using pesticides, and the beef is grass-fed and organic."

"There are plenty of premade options you can grab that are just as nutritious as the fresh-cooked version, like Starbucks egg white bites, Trader Joe’s palak paneer or frozen microwavable vegetables."