The 2028 Wealth-Tax Primary Takes Shape: Sanders–Khanna 5% National Bill vs. Newsom's $100M+ Minimum Tax

The 2028 Wealth-Tax Primary Takes Shape: Sanders–Khanna 5% National Bill vs. Newsom's $100M+ Minimum Tax

The federal wealth-tax question has crystallized into a concrete 2028-primary cleavage with two competing designs now on the record.

The Sanders–Khanna bill. "More recently, Sanders and Khanna have co-sponsored a bill that would impose a national wealth tax of five per cent on billionaires, which Khanna says would raise four hundred billion dollars a year¹" (The New Yorker, Oct 12). Khanna frames it as unprecedented: "This is the first initiative to actually tax billionaire wealth that's going to get a vote, not only in our nation but the world." The $400B/year claim is the number to scrutinize: it implies a billionaire wealth base of ~$8 trillion (Khanna's own figure elsewhere: "989 billionaires hold $8 trillion in wealth") taxed at 5% with zero flight, avoidance, or valuation discount — the same no-elasticity assumption that the European record and even the pro-tax NBER Norway paper (flight cost ~3.5 points of the gain, NBER's Norway Verdict (2021–2025): Flight Is Real but Cost Only ~3.5 Points of a 75% Revenue Gain) suggest is optimistic, though at the federal level the exit margin is renunciation plus the US exit tax rather than a drive to Nevada.

Newsom's counter-design. The day after Prop 40 qualified (June 26), Newsom proposed "a federal minimum tax rate on Americans worth more than $100 million, rather than a state level one-time 5% wealth tax that the governor argues could be dodged by billionaires who could leave the state" (ABC News). His Substack rationale is the interstate-flight argument in one line: "You may not be able to pick up and move to Texas or Florida to shelter your income from taxation, but I promise you that billionaires can, and do… Wealth is movable, and it shops for the state with the lowest taxes." The package also includes undoing the 2017 corporate tax cuts, boosting inheritance taxes, and closing the borrow-against-unrealized-gains loophole (CalMatters). Note the structure: Newsom opposes the state wealth tax while proposing a federal one — the feasibility argument (mobility) and the constitutional argument (states can't reach worldwide wealth; see the Hoover paper's Due Process analysis in California Proposition 40 Endgame: Newsom Backs the Ban, Hoover Scores a Net Loss, and the FTB War-Room Problem) both point federal, where Moore v. United States (2024) left several justices signaling a federal wealth tax would be unconstitutional under the direct-tax apportionment rule. The New Yorker lays out the escape routes: a capital-gains tax on inheritances, or the Biden-style framing of unrealized gains as income — "legally, it could be considered an income tax."

The primary dynamic. The New Yorker's political verdict: the 2028 race will feature "a raise-your-hand moment at the early Democratic-primary debates" in which no candidate can duck wealth taxation — with Prop 40's fate as the trigger. The endorsement arithmetic shows why the question is live: despite the California Democratic Party's endorsement of Prop 40, only 3 of 52 California House members and 10 state legislators backed it, both US senators declined, and gubernatorial nominee Xavier Becerra opposes it — while Khanna argues "taxing billionaires will be one of the three key pillars to a Democratic campaign… Medicare for All, taxing billionaires, and not having foreign wars."