Blue States Turbocharging Their Own Collapses With New Tax Gambits

Some of the bluest blue states in the country are collectively flirting with disaster as they weigh new tax policies to address their respective budget crises and keep the entitlement gravy train chugging to nowhere.

The most notable proposal is California’s Billionaire Tax Act, which would impose a one-time 5% tax on residents worth more than $1 billion. The move has already driven out several companies and high-net-worth individuals, including Google co-founder Larry Page and White House AI czar David Sacks, and triggered internal strife among state Democrats.

Imagine you are an entrepreneur, and your net worth is tied up in your company’s paper valuation. Thankfully, you might not have enough liquid assets to be subjected to California’s tax proposal. But if your company is valued at, say, $3 billion, you would still be getting handed a huge tax bill for that valuation. And, if you try to run for the hills and book it to a more business-friendly state, your former state could hammer you with the wealth tax after you’ve moved.

SAN FRANCISCO, CALIFORNIA – FEBRUARY 28: California Gov. Gavin Newsom gestures at an event promoting his book “Young Man in a Hurry” on February 28, 2026 in San Francisco, California. Newsom’s book, which he discussed with Journalist Kara Swisher on stage, reflects on his life and career. (Photo by Benjamin Fanjoy/Getty Images)

Meanwhile, Washington state recently passed a 9.9% tax on incomes over $1 million. The state had never had an income tax in its history. As the bill cleared its final hurdles, Starbucks founder Howard Schultz announced he was leaving for Florida, and it’s hard to blame him.

Under a proposed amendment to Michigan’s state constitution, a 9.25% top income tax rate for earnings exceeding $500,000 would be established to skim money from the wealthy. But it would surely trigger a mass exodus of productive residents, drastically weakening the state’s tax base.

Earlier in March, Democratic New York Gov. Kathy Hochul actually had a moment of clarity and saw the writing on the wall: her state’s tax base — all these pesky rich people who pay a ton in taxes — had taken a devastating hit, partly due to Zohran Mamdani’s election. New York has been ratcheting up taxes on the wealthy since 2009. (RELATED: Dem Governor Begs Rich People Who Fled New York For Florida To Return And Foot Bill For ‘Generous Social Programs’)

“I need people who are high-net worth to support the generous social programs that we want to have in our state, right?” Hochul said at a March 11 event. “Now, there are some patriotic millionaires who stepped up. Okay, cut me the checks if you want to be supportive. But maybe the first step should be to go down to Palm Beach and see who we can bring back home because our tax base has been eroded.”

NEW YORK, NEW YORK – MARCH 03: New York City Mayor Zohran Mamdani speaks during a press conference on Universal Childcare at the Sugar Hill Children’s Museum of Art & Storytelling on March 03, 2026 in New York City. Mamdani was joined by Gov. Kathy Hochul and Kamar H. Samuels, Chancellor of New York City Public Schools, as they announced the first phase of Universal Child Care that will begin this fall for children under five years of age across the state. The program is intended to strengthen the existing 3K program to achieve universal care. The first year will focus on “high-need areas” selected by the city, and then expand across the city by the fourth year. (Photo by Michael M. Santiago/Getty Images)

These are the sorts of punitive policies that lead to the opposite of what is intended, as Hochul acknowledged. What is intended, of course, is that if you seize citizens’ wealth and indirectly redistribute it through state welfare and entitlement programs, the money will eventually trickle down to the poorest and neediest. That’s an idealistic goal at best. Rather than reforming the bloated welfare programs and the bureaucracies that sustain them, blue states would rather notch cheap political victories by attacking the wealthy with higher taxes. It’s like trying to put a dirty Band-Aid over a serious gash that’s hemorrhaging blood.

In his great and hilarious 1970 piece, “Mau-Mauing the Flak Catchers,” the famed writer and journalist Tom Wolfe ripped into San Francisco’s Office of Economic Opportunity and its web of anti-poverty programs at the time. Wolfe discovered that these programs weren’t really helping poor people, but rather enriching hustlers taking advantage of hapless bureaucrats. Not unlike Minnesota’s fraud-riddled welfare system of 2026, San Francisco’s poverty program was rife with corruption, and everyone turned a blind eye because they didn’t want to offend minorities.

If blue states want to get serious about helping the needy, they should first consider the shortcomings of their own welfare programs and their adverse effects. The budget crises are real, but the solutions are not. Pumping more tax revenue into bureaucracies with little to no oversight will only harm citizens, rich and poor alike.