The Deceptive Statistics Behind California’s Wealth Tax

Saez and Zucman have spent years using dubious assumptions to push the case for confiscation

By Phillip W. Magness. Excerpts:

"For years the pair (Emmanuel Saez of UC Berkeley and Gabriel Zucman of the Paris School of Economics) have relied on selective accounting methods and questionable assumptions to tilt the scales in favor of confiscatory wealth taxes."

"Under the U.S. system, taxes are generally assessed on income earned over the course of a year. Since 1920, federal tax law has followed the realization principle, meaning that income must actually be realized as earnings before it can be taxed. Messrs. Saez and Zucman instead propose taxing estimated changes in a person’s net worth—including unrealized capital gains that exist only on paper. If a billionaire’s stock portfolio rises in value, they want to tax the appreciation even if the assets are never sold."

"Unrealized gains are notoriously volatile and speculative. They can disappear overnight with a market downturn. Federal courts have long viewed taxes on unrealized gains as constitutionally dubious"

"The underlying wealth estimates are deeply unreliable. Because billionaire tax returns are private, Messrs. Saez and Zucman rely heavily on outside estimates of billionaire wealth. One of their favorite sources is the Forbes 400 list."

"wealthy Americans to exaggerate rather than minimize their fortunes"

"these estimates are systematically inflated."

"the pair has repeatedly asserted that the ultrarich pay a combined federal, state, and local tax rate of only 23%, supposedly lower than the 24% working-class Americans pay."

"Messrs. Saez and Zucman’s own earlier research told a very different story. In a 2018 paper published in the Quarterly Journal of Economics, their own data files showed that the top 0.001% pay an average combined tax rate of roughly 41%."

"they changed their approach and assigned the full burden of the corporate tax to shareholders alone."

"this maneuver dramatically lowers the apparent tax rate paid by billionaires." 

"they artificially inflate the tax burden borne by lower-income Americans . . . omit the EITC from their calculations."

"Jason Furman finds that the bottom 20% of Americans face an overall combined tax burden of approximately 11%"  

Mamdani vs. Bodegas

His socialist supermarkets could put New York’s little grocers out of business

By Faith Bottum of The WSJ. Excerpts:

"Many bodega owners say the mayor has betrayed them by pushing ahead with his plan to create city-owned supermarkets. The government “should be working with us,” says Francisco Marte, 59, owner of Green Earth Food in the Bronx and president of the Bodega and Small Business Association of New York. “That type of business run by the government, they never succeed. They always fail, and they fail big and with a lot of money that could have been used for something better.”"

"But five grocers are already within a two-block radius of that proposed Harlem store, with 10 more within five blocks."

Private Property, Liberalism, and Human Flourishing

Private property enables individuals to pursue happiness through their own free choices. It also shields our individual and institutional projects from arbitrary power

By Alexander William Salter. Excerpt:

"For thousands of years, human living standards were basically stagnant: in inflation-adjusted terms, world GDP per capita fluctuated around $1,500 per year. In the nineteenth century, commercial innovations, including widespread protection for private property rights, gave rise to the Industrial Revolution. This resulted in history’s only sustained reduction in human poverty. In the United States, for example, GDP per capita in 1800 had risen to approximately $2,500 per year. It more than tripled over the next century, to $8,000 per year. Near-continuous economic growth yielded a figure of nearly $50,000 per year by 2000, and nearly $70,000 today. 

Other western nations that embraced capitalism enjoyed similar increases in material prosperity. Asian nations, such as Japan, South Korea, and (more recently) China, have also benefited from embracing private property rights. These successes strongly suggest there is something universal about the relationship between private property and economic wellbeing. It’s not culturally contingent.

Our historically unprecedented level of wealth only exists because private property enables an extensive division of labor. Exponential gains in per capita GDP would be impossible, and indeed, they have never occurred in a sustained way without productivity-enhancing specialization and trade. This decentralized process for creating and exchanging wealth requires coordination. As Ludwig von Mises recognized, private property rights are vital. Without private property, trade and markets could not exist. And without markets, there would be no market prices—critical indicators of resource value in varying lines of production. Profit and loss accounting could not be meaningful without prices, meaning businesses would have no reliable way to ascertain whether they were satisfying consumer wants. It is the system of market prices, adjusting in response to supply and demand changes, that gives commercial society its unique power to create wealth. Private property is the keystone: it holds the whole market edifice together.

The greatest benefits of the price system often emerge during times of turbulence. When war between the United States, Israel, and Iran choked off shipping through the Strait of Hormuz in early 2026, the price of crude oil spiked. Refiners, shippers, and drillers across the world rerouted and searched for new supply, responding to the price shock without needing to know anything about geopolitical stakes or possible resolutions. The price carried the knowledge so that they did not have to. 

It may seem strange to use hardship to illustrate the importance of private property and prices. But in fact, it reveals why they matter. Oil became scarcer as a result of the war. That made everyone in the world poorer. Nothing can change that so long as the conflict continues. Instead, the price system allows economic actors oceans apart to find and pursue least-cost adaptations. Non-market and non-price rationing work poorly on this scale. At least with property and prices, we know where we need to change.

Private property buttresses the market process in several other ways. Building on Mises, F. A. Hayek realized that prices allowed households and firms to benefit from each other’s private and often tacit information. The price system, founded on private property, thus functions as a powerful communication and feedback system. Ronald Coase argued that market values for owned resources allowed conflicting parties to resolve their disputes by bargaining. Armen Alchian, William Allen, and Harold Demsetz pointed out that firms’ property rights to their residual income aligned the interests of producers with consumers, and that the firm itself, as an organizational form, was possible only because private property allowed for the necessary contractual structures. The immense productive capacity of contemporary capitalism, which we often take for granted, relies on practices rooted in private property.

Human flourishing obviously depends on more than material wealth. “Man does not live by bread alone.” Yet he does need bread to live. The material abundance created by markets keeps us fed, sheltered, clothed, literate, healthy, and entertained. It also provides the means for us to pursue meaningful artistic, intellectual, and moral projects. Private property is the reason we can have all of these things."

The house doesn’t always win: Why prediction markets aren’t gambling

By Steve Swedberg of CEI. 

"“If it talks like a duck and quacks like a duck, it must be a duck.” That phrase is not reserved for ducks. It is often invoked about prediction markets, where some view them as akin to gambling. Prediction markets, after all, are exchanges where participants buy and sell contracts tied to future events, including elections, economic data releases, and regulatory decisions.

The similarities to gambling are easy to see. Both involve risk and uncertainty. Both can result in gains or losses depending on whether participants correctly anticipate future events. People put money on uncertain outcomes, some participants are chasing profits, and winners collect at the expense of losers. To many, that sounds a lot like gambling.

If that were the full picture, calling prediction markets gambling would be reasonable. Indeed, that perception has fueled calls for greater scrutiny, including the Commodity Futures Trading Commission’s (CFTC) recently proposed framework to clarify the regulatory treatment of prediction markets.

At the same time, states including Nevada, New Jersey, and Maryland have argued that prediction markets must cease and desist or obtain casino-style gambling licenses to operate within their borders. Platforms such as Kalshi dispute that view and argue that federal regulation by the CFTC preempts state gambling laws, with courts so far issuing mixed rulings.

But stopping at the similarities obscures the features that matter most. The question is not whether prediction markets resemble gambling in some respects, but whether those similarities are their most salient features.

There is a reason why “the house always wins” is an adage for casinos: most gambling institutions are structured around a house that profits regardless of the outcome. The house acts as the counterparty to bettors and sets odds designed to ensure a profit margin, commonly known as the “vig.” This built-in advantage means the casino’s interests are fundamentally at odds with those of its customers.

Prediction markets operate differently because participants trade with one another in a peer-to-peer exchange, meaning that market participants take opposite sides of a contract instead of wagering against a bookmaker. While platforms may charge transaction fees, they do not take directional positions on outcomes or profit when users lose. Instead, they function as neutral marketplaces that match opposing views about future events.

Because of this structure, prices emerge from continuous competition among traders with differing information and beliefs. As new information arrives, participants can adjust or exit positions, allowing expectations to be rapidly incorporated into prices. In structure and operation, this mechanism more closely resembles a futures exchange than a casino floor — a distinction recognized in a CEI-led coalition letter on prediction market regulation.

The distinction between prediction markets and gambling becomes clearer when examining their economic function. Like most financial markets, they attract risk-takers who speculate on differences in expectations in search of profit.

That alone does not make prediction markets equivalent to gambling. These speculators play an essential role in stock, commodity, and futures markets by providing liquidity and improving price discovery. This structure shapes how prediction markets incorporate dispersed information.

Prediction markets can also serve a hedging function. Hedging is the practice of reducing exposure to risk by taking a position that gains value if an adverse outcome occurs. As CEI Director of Finance Policy John Berlau notes, businesses and organizations exposed to political, regulatory, or economic risks can use prediction markets to take positions that offset uncertainty in those areas, much like a farmer can hedge against crop failures or an airline can hedge against fuel price volatility.

In this respect, prediction markets more closely resemble other financial markets, such as futures, options, and foreign exchange markets.

Yet risk transfer is only part of the story. Unlike the recreational activity of gambling, prediction markets generate a powerful asset: real-time forecasting data. As Berlau has noted, prediction markets allow participants to translate dispersed knowledge about elections, sports, and other events into prices that reflect collective expectations.

Empirical research finds that these prices are as accurate as — and in many cases more accurate than — polls, expert judgment, and alternative forecasting methods in high-liquidity markets. The accuracy of these forecasts depends on the process of price discovery through which new information is incorporated into prices.

A London Business School study found that about 3 percent of traders account for most price discovery. That does not mean that the other 97 percent of traders are unhelpful. On the contrary, the remaining traders provide the liquidity necessary to maintain prediction markets and incorporate information into prices.

This structure closely resembles equity, foreign exchange, and commodity futures markets, where a small group of informed traders sets marginal prices while broader participation facilitates price discovery. By aggregating dispersed information into a single market signal, prediction markets can help traders, businesses, policymakers, and the public make better-informed decisions in the face of uncertainty.

The debate over prediction markets is not ultimately about wagering but about whether policymakers will regulate an institution according to its appearance or its function. Prediction markets transfer risk, aggregate information, and generate forecasts that can improve decision-making across society.

Treating them as gambling risks imposing regulatory burdens that could limit experimentation, forecasting innovation, and the development of new information markets. When regulators mistake a forecasting tool for a casino game, innovation becomes the first casualty."

Work and leisure over time

 Tweeted by Vincent Geloso.

 

The Effect of Online Sales Bans on E‑Cigarette Use

From Jeffrey Miron.

"Despite reports that they are less harmful than regular cigarettes, legislators have targeted e-cigarettes and vapes via crackdowns and online sales bans, citing a desire to protect young people.

A new study examines the effect of online sales bans on use of electronic nicotine delivery systems (ENDS). The study

used data from five national surveys conducted between 2013 and 2023 and leveraged the staggered adoption of the bans across states … [to] reveal no evidence that prohibiting online sales reduced youth e‑cigarette use. … Furthermore, these bans had a minimal effect on the frequency of use among continuing users.

The legislation was ineffective because

young people rarely used the internet to obtain ENDS products before the bans. … Although the bans significantly reduced online purchases of ENDS products, the overall reduction in youth use was less than 1 percentage point.

Indeed,

online purchases fell by 40–50 percent on average, suggesting that young people continued to obtain ENDS products online through illegal shipments … [and] shifted from online to in-person purchases and obtained more ENDS products from family and friends.

The bans also did not stop adults from using ENDS; the study shows

no evidence that online sales bans reduced e‑cigarette or cigarette use among adults, even though adults use these products at higher rates than young people."

Colorado’s Funeral (licensing) Mistake

By Alex Tabarrok.

"Today about a quarter of the US workforce are required to have a license to work in their chosen profession, up from just 5 percent in 1950. Almost always the trend has been to add occupational licensing over time, but in 1983 Colorado did something unusual: it delicensed funeral service workers such as funeral directors. Brandon Pizzola and I analyzed what happened in our 2017 paper, Occupational licensing causes a wage premium: Evidence from a natural experiment in Colorado’s funeral services industry.

What we found was that delicensing reduced wages, reduced prices, and caused a shift towards cremation rather than the more expensive mortuary services preferred by funeral directors. Here’s a key figure.

 

But that is not the end of the story. In 2023 a series of gruesome abuses came to light involving the sale of body parts, rotting bodies, and worse. Newspapers repeatedly noted that Colorado was the only state not to license funeral service workers. As a result, Colorado is relicensing funeral service workers as of 2027.

The problem is that there is no evidence that abuses were worse in Colorado. It’s easy to find similar abuses—including sexual abuse of corpses—in states with heavy licensing. Pizzola and I didn’t examine the rate of necrophilia among funeral workers in our paper (silly us), but we did cite the following:

A recent US government review of occupational licensing concluded that “the empirical research does not find large improvements in quality or health and safety from more stringent licensing” (CEA, 2015). Similarly, Colorado revisited their decision in a 1990 sunrise review that considered reinstating occupational licensing. The Colorado Department of Regulatory Agencies found that since the 1983 occupational delicensing: (1) “there had been incidents of malpractice within the profession but no widespread pattern of abuse,” (2) “[a]llegations of significant threats to the public health, safety and welfare perpetrated by the death care industry in Colorado regarding the improper disposal of human or infectious wastes had not been supported by verifiable evidence,” and (3) “claims that the public in Colorado had suffered or might suffer significant detriment due to a lack of trained mortuary science practitioners caused by the abolition of the Board were unsupported” (Colorado Department of Regulatory Agencies, 2007).

Moreover, the licensing requirements—mandating various hours of training and so forth—have very little to do with the types of abuses that generated public support for relicensing. How many hours of “don’t have sex with corpses” training is required? And the funeral director in the worst Colorado case was in fact sentenced to 40 years in jail. Isn’t that incentive enough?

People want what cannot be guaranteed: good behavior in all circumstances. And they will reach for a licensing regime if it promises that, even when such promises are empty."