Brian Galle
@bdgesq.bsky.social
Berkeley law prof guy, erstwhile Georgetown, DOJ, & points in between. Mostly boring tax stuff; occasional dollops of nonprofits, law & econ, etc. Could be arguing in my spare time.
Economics
48%
Business
26%
And there is one justice who thinks that there should be essentially no judicial review of retroactive legislation at all.
Can you guess who it is? I bet you can't.
It's Clarence Thomas.
Can you guess who it is? I bet you can't.
It's Clarence Thomas.
Both before and after the 1913 Act, all kinds of taxes, ranging from tariffs to income taxes to provisions of OBBBA adopted just this past July, were adopted retroactively to the beginning of the year or even farther back. Courts give very, very deferential review of those provisions.
Some lawyers who are trying to drum up billionaire business are saying that the Jan. 1 provision is unconstitutionally retroactive. That is bunk, as we explain.
The 1913 income tax--the biggest tax change in U.S. history--was adopted retroactively, and SCOTUS expressly upheld that provision.
The 1913 income tax--the biggest tax change in U.S. history--was adopted retroactively, and SCOTUS expressly upheld that provision.
For example, several stories report that a few billionaires (of the likely 250+ in CA today) are "making plans to" shift some business out of California or try to establish residency elsewhere. That will not avail them, as the bill will tax anyone resident in California as of January 1, 2026.
Expert Report On The California 2026 Billionaire Tax: Revenue, Economic, and Constitutional Analysis
This report summarizes key provisions of the California Billionaire Tax Act. It also answers some frequently asked questions.
papers.ssrn.com
There's a lot of misinformation already floating around about the #CABillionaireTaxAct. We have posted some new resources for folks who want to learn more.
1. FAQs about the bill.
papers.ssrn.com/sol3/papers....
2. Rebuttal of some dumb legal arguments about it:
papers.ssrn.com/sol3/papers....
1. FAQs about the bill.
papers.ssrn.com/sol3/papers....
2. Rebuttal of some dumb legal arguments about it:
papers.ssrn.com/sol3/papers....
McKesson Corp. v. Div. of AB & T, 496 U.S. 18 (1990)
McKesson Corp. v. Div. of AB & T
supreme.justia.com
Yeah, that's generally the rule. See supreme.justia.com/cases/federa...
You can think of it as similar to punitive damages in that the point is to deter state actors from violating the Constitution (assuming you think they internalize harms to their budget), not to make the right plaintiff whole.
You can think of it as similar to punitive damages in that the point is to deter state actors from violating the Constitution (assuming you think they internalize harms to their budget), not to make the right plaintiff whole.
Also, it is very hard to see the logic of how you could do traditional QE if you cannot print money. If you borrow to finance the QE, then, eh, you have not changed the trading volume of government debt. At best you are rearranging the term structure of the debt, probably at a net loss right now.
Finishing up a paper about this effect (and why it's awesome) soon. But actually in this case expectations would be of a vague possibility of a future 1% annual tax.
How about a 1% (plus small deferral charge) tax for 5 years? Can I interest you in that?
Yeah we have a little section on this in "Money Moves" wherein our basic take is states should probably decouple from most tax expenditures. Especially higher-rate states. Like, is the optimal subsidy amount for anything really 8 p.p. higher in California?
Notably, though, the article fails to mention that it is now too late for a billionaire to leave to avoid the tax.
California could impose a billionaire tax. Here's how it would work and where the money would go.
Proposed California ballot initiative would impose a one-time 5% tax on billionaires, with the revenue funneled toward health care and education.
www.cbsnews.com
A decent summary from CBS. They are still doing some news there I guess.
www.cbsnews.com/news/califor...
www.cbsnews.com/news/califor...
Introduce yourself with what almost killed you:
Hi, I'm Rhabdomyolysis in the middle of Yosemite with the nearest trailhead 22 miles away.
Hi, I'm Rhabdomyolysis in the middle of Yosemite with the nearest trailhead 22 miles away.
Introduce yourself with what almost killed you:
HI, I'm 360s across 4 lanes of busy but not slow I-95 traffic
HI, I'm 360s across 4 lanes of busy but not slow I-95 traffic
Introduce yourself with what almost killed you:
Hey, what's up? I'm "grading 80 corporate tax exams."
Hey, what's up? I'm "grading 80 corporate tax exams."
Reposted by Brian D. Galle
Introduce yourself with what almost killed you:
HI, I'm 360s across 4 lanes of busy but not slow I-95 traffic
HI, I'm 360s across 4 lanes of busy but not slow I-95 traffic
Hello, I'm a ruptured brain aneurysm.
Introduce yourself with what almost killed you:
Hi, I'm Rhabdomyolysis in the middle of Yosemite with the nearest trailhead 22 miles away.
Hi, I'm Rhabdomyolysis in the middle of Yosemite with the nearest trailhead 22 miles away.
Are you a billionaire? Happy New Year! If you're living in California today & the 2026 Billionaire Tax Act passes, you'll pay a one-time 5% tax on your net worth (which you can spread over 5 years if you pay a small deferral charge).
Indeed, not that George Yin. We'd love to have both!
Reposted by Brian D. Galle, W Grant
ProPublica
@propublica.org
· 11d
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Respectfully, as the co-author of multiple mark-to-market bills, can I suggest that you read them first and then get back to us on whether they "underestimate the...complexity"? Among other tools, you can use retrospective tax (taxing at sale with an interest charge) for volatile or illiquid assets.
Indeed, and the same general spin on an Auerbach-Bradford retrospective tax works for pretty much any hard to value asset.
"Solving the Valuation Challenge: The ULTRA Method for Taxing Extreme W" by Brian Galle, David Gamage et al.
Recent reporting based on leaked tax returns of the ultrarich confirms what experts have long suspected: for the wealthiest Americans, paying taxes is mostly optional. Some of the country’s richest ha...
scholarship.law.duke.edu
Notional equity shares resolves the governance questions Wojtek raises, as my co-authors & I have explained at (to an economist or other reasonable person) painfully great length:
scholarship.law.duke.edu/dlj/vol72/is...
scholarship.law.duke.edu/dlj/vol72/is...
Reposted by Brian D. Galle, Pepper D. Culpepper
The Onion
@theonion.com
· 13d
Tech Billionaires Threaten To Flee California Over Proposed Vest Tax https://theonion.com/tech-billionaires-threaten-to-flee-california-over-proposed-vest-tax/
Yes in the case of capital gains there was some uncertainty about what the Court would do with gains accrued before the 16th Am. was ratified.
The Second Estate: How the Tax Code Made an American Aristocracy share.google/hlFoVuE27pah...
Yeah, as we report in the findings section (based on work by Emmanuel, Danny, and Gabriel, and their excellent grad student), billionaires pay an all-in tax rate of 20% less than the median household. Their share of state tax is almost surely even smaller.
Reposted by Brian D. Galle
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“California is on a path to self-destruction,” wrote Bill Ackman, joining opposition to a tax proposal alongside Google’s cofounder and more.
Possible California Wealth Tax Causes Billionaire Freakout: Page, Thiel Threaten To Leave
“California is on a path to self-destruction,” wrote Bill Ackman, joining opposition to a tax proposal alongside Google’s cofounder and more.
www.forbes.com
This is the same guy who predicted the streets of Manhattan would be clogged with millionaires' moving trucks, yes?
Just as a reality check, the CBTA would reduce the growth of an avg billionaire's wealth from ~7% to 6% annually for 5 years.
If your COLA got cut by 1%, would you quit & move to FL?
Just as a reality check, the CBTA would reduce the growth of an avg billionaire's wealth from ~7% to 6% annually for 5 years.
If your COLA got cut by 1%, would you quit & move to FL?
So, long story short, it is routine for tax legislation to define the scope of what's taxed with reference to events that occurred during the year. Obviously SCOTUS can reject precedents, but it would likely have to toss a large body of prior cases to find anything problematic about the CBTA.
/fin
/fin
The legislature doesn't even have to say what the rational basis is, as long as there could be one.
Notably, Justice Thomas concurred with the majority, and indeed would have gone even further in finding that there are basically no limits under the Due Process Clause on retroactive taxes.
/7
Notably, Justice Thomas concurred with the majority, and indeed would have gone even further in finding that there are basically no limits under the Due Process Clause on retroactive taxes.
/7
Carlton makes a few key points. For one, it observes that the Court routinely upholds tax rules that only reach back to the beginning of the calendar year, or a little bit before.
Second, it says that retroactive tax rules are permissible as long as they serve some rational basis.
/6
Second, it says that retroactive tax rules are permissible as long as they serve some rational basis.
/6