Let’s stop pretending.
Maine’s new tax on millionaires is being sold as a narrow measure aimed only at the wealthy. Signed into law by Governor Janet Mills, the policy imposes a 2% surcharge on income over $1 million, effective January 1, 2026.
California also has proposed a ballot initiative taxing billionaires a one-time 5% tax to be voted on in November of this year. The state is looking to raise funds by targeting approximately 200-214 of the state’s wealthiest taxpayers.
On its surface, the measure sounds modest and targeted to a specific demographic. But policies like this rarely stay that way.
Most Americans hear the phrase “billionaire” or “millionaire” tax and assume it has nothing to do with them. That is precisely what makes proposals like this so politically effective and economically shortsighted. Tax increases framed as targeting only the highest earners rarely remain confined to their original audience.
First, it’s just “the rich.” Then it is households earning $500,000. Then $250,000. Over time, the definition of the rich has a way of expanding until one day, it looks a lot more like you. We’ve seen this happen over and over again throughout our nation’s history.
This is why the debate should not be reduced to who can “afford” to pay more. The more important question is what happens when governments increasingly view economic productivity as an expandable tax base.
Politicians rarely say this directly, but they are not simply taxing income. They are targeting the people who create it. These policies do not just affect abstract income categories. They affect the individuals most responsible for driving economic activity: business owners, investors, entrepreneurs, and employers. These are the people taking risks, signing paychecks, allocating capital, and funding growth.
When governments increase the tax burden on these groups, the effects go beyond revenue collection. They change incentives.
And incentives matter.
Tax policy shapes behavior. When high earners face higher tax burdens, they often respond rationally. Some relocate to states like Florida and Texas. Others shift investments out of high-tax regions or restructure how and where they generate income.
And when capital moves, it rarely moves alone. Jobs move with it. Investment moves with it. Opportunity moves with it.
While California and Maine move to raise taxes, many other states are moving in the opposite direction. Rather than increasing tax burdens, they are actively competing for businesses, investors, and skilled professionals by offering more favorable tax environments.
States are not just competing politically; they are competing economically. Some states are sending a clear message: come build here, come invest here, come grow here. Others are sending the exact opposite message. And people are listening.
Taxpayers at these income levels are often the most capable of adjusting behavior in response to changes. But when projected revenues underperform, governments are left with the same spending obligations and fewer dollars than expected. That creates a familiar temptation: broaden the tax base.
Governments rarely shrink voluntarily. More often, they seek new or expanded sources of revenue. That is why this conversation extends far beyond California and Maine, and beyond “the rich.” It is fundamentally about how policymakers view success, investment, and growth.
Do we want a system that encourages people to build businesses, invest capital, and create jobs? Or do we increasingly treat those activities as opportunities for higher taxation?
This was never just about the rich paying more. It is about whether success should be encouraged or penalized. It is about whether we want to be a country that rewards people for building, or one that punishes them for it.
You can pass laws, raise rates, and target income, but you cannot force capital to stay. In today’s economy, capital moves. And when it moves, it does not ask permission.
