Californians are set to vote on Proposition 40, which would take 5% of fortunes above $1 billion, once, and send nine-tenths of the revenue to fund California’s Medicaid program. A swarm of Silicon Valley billionaires, including Google co-founder Sergey Brin, has spent more than $333 million campaigning against the potential tax, warning it will backfire and push the wealthy to flee the sunshine state.
I support Proposition 40. But it is not sufficient in addressing the underlying economic issues at hand.
To understand how these systems work, think of the iPhone. As I argued in my book The Entrepreneurial State, the iPhone's foundational technologies came from public research: the internet, GPS, the touchscreen, and the voice recognition behind Siri. Speech understanding research at Carnegie Mellon, MIT, and Stanford Research Institute was funded by the Defense Advanced Research Projects Agency (DARPA) in the 1970s. Researchers then spent two more decades on language and learning systems no company would finance, because the payoff lay thirty years out.
And then there’s SpaceX, whose listing made Musk a trillionaire, took $396 million from NASA to develop the Falcon 9 and the Dragon capsule, then $1.6 billion to fly cargo to the space station and $2.6 billion to fly astronauts. The world’s richest man was also the biggest political donor this election cycle, spending $366 million supporting Republican causes.
None of this takes anything away from the entrepreneurs. Turning a research program into a reusable rocket is hard. The public carried the risk in the years when these technologies had no market and no buyer. The state carries the blame: for not setting out, in the contracts, the terms of that initial investment and a fair share of the rewards for the risk the public took.
Economists call this socializing risk and privatizing reward. It describes a contract drafted without the confidence to ask for anything.
I believe those conditions did not go far enough. Wage standards covered laborers and mechanics rather than every worker, and affected communities got no formal seat in the decisions. But the principle is American, recent, and bipartisan. Public money can come with terms.
But establishing this kind of capitalism requires that we commit to another principle: access for all and reward sharing. If the public carries the risk, it should hold a claim on the reward. In practice, that means equity stakes in companies built on public loans, royalties on patents from publicly funded research, and a public fund that recycles the returns into the next round of risk. The United States has started to embrace this philosophy in its semiconductor infrastructure funding. It could do the same for our public investments in artificial intelligence, and those contracts are still being written.
None of this is an argument for voting against Proposition 40. California's billionaires should pay, and the state's health system needs the money. But a one-time levy collected decades after the fact is a costly way to claim a return that could have been written into the contract at the start. Redistribution settles old accounts. Pre-distribution can redesign an economy from the outset for more inclusive, sustainable growth.
An economy is not weather, a natural phenomenon that cannot be designed differently or more fairly. It is a set of contracts, and we are the ones who write them. We can write them for an economy designed with people and for them, one that shares the knowledge and the rewards along the way. The common good economy provides the principles through which to achieve this.
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