According to Smetters, the primary issue with wealth taxes is that they rarely meet revenue expectations. “When you think about the wealth tax itself,” he told Fortune, “it’s not really a super efficient way of raising money over time, and it also often doesn’t actually raise as much revenue as people think.” He noted that many countries that adopted a wealth tax “gave up on it, partly just because it raised a lot less revenue than what they were thinking.”
Smetters cited some PWBM research, provided exclusively to Fortune, that asked the question: what would happen if it were illegal to be a billionaire, as some far-left figures such as Zohran Mamdani have previously suggested. If the federal government seized every dollar from every individual above $999 million at current market value, the resulting “wealth grab” would only fund the federal government for about seven to eight months, he said. (For calendar year 2025, it would be 8.8 months, based off $5.9 trillion for all U.S. billionaire wealth above $1 billion, and slightly over $8 trillion in government spending through December 31.) “What people don’t realize is [there’s] just not as much money there as people think.”
Instead of “jacking up” income taxes or implementing a wealth tax that targets illiquid assets—such as sports teams or startups—Smetters suggested that California could do with “broader participation in tax revenue,” recommending that the state consider more stable, broad-based options like a large sales tax or a value added tax (VAT). Without such discipline, Smetters warned that the state’s reliance on a highly progressive and volatile tax system will continue to leave it vulnerable to economic shifts.
Smetters said that he has a free-market bias somewhat, in the sense that he jokingly calls himself “80% libertarian,” meaning he generally thinks free market principles are the most effective at increasing human welfare, with some regulatory exceptions including pollution control and some human capital investments, especially at younger ages. In contrast, a lot of government spending today goes higher-income and older people.
When asked why he thinks there is such a push for a billionaires tax at the moment, Smetters described what he saw as a “perfect storm of craziness” involving the rise of artificial intelligence (AI) and the influence of social media. The concentration in the S&P 500 is one thing, he said, with only 10 companies at the top really driving all the gains in the three-year bull market since ChatGPT was released, and an existential fear (driven on by tech billionaires) about AI coming to replace everyone’s job. Smetters said this was making people “unnecessarily anxious” that “we’re getting replaced by robots and so forth.”
Standing in front of a row of terminals working away on his budget analyses, Smetters insisted that “the reality is that AI is not going to be that as impactful as people think.” Pointing at the computers all around him, he noted, “I literally have models running right now, and so I am a big user of AI,” but many were “probably embellishing how much impact it’s going to potentially have.” He distinguished between the two types of technologies: labor-augmenting versus labor-replacing, insisting that AI would be the former.
