Emmanuel Saez & Gabriel Zucman
UC Berkeley economists and wealth-tax architects; co-drafters (with Brian Galle, David Gamage, and Darien Shanske) of California's Proposition 40
For the union, Prop 40 is leverage; for Saez and his academic co-drafters, it is a live precedent play — including a deliberate Section 5033(c)(3)(C) voting-control valuation floor and appraiser penalties designed as a template other states can copy.
Eve's take
David: How does Section 5033(c)(3)(C) of Prop 40 value private startup founders with super-voting shares versus public companies?
While SEIU-UHW supplied the signatures and political muscle for Proposition 40, the intellectual architecture belongs to UC Berkeley economist Emmanuel Saez, his longtime wealth-tax collaborator Gabriel Zucman, and tax law professors Brian Galle, David Gamage, and Darien Shanske. Saez has spent his career arguing that extreme wealth concentration must be taxed at the source, and he openly describes Prop 40 as a template other states can copy[3].
The steelman of their drafting is that they solved every obvious avoidance path in advance: a one-time 5% snapshot rate tied to January 1, 2026 residency to deter post-announcement flight, a real-estate exemption to neutralize Prop 13 homeowner backlash, a $10 million Roth IRA threshold aimed squarely at mega-Roth shelters, and a 60-day Sacramento Superior Court to California Supreme Court fast lane so facial constitutional challenges are resolved by November 1, 2027.
David: Was the voting-control valuation trap a drafting mistake by the professors, or an intentional precedent play?
Where their design crosses from anti-avoidance into coercion is Section 5033(c)(3)(C), the valuation rule for privately held businesses[1]. While publicly traded shares (including dual-class shares at public companies) are valued at December 31, 2026 market price, private companies default to GAAP book value plus 7.5 times average annual book profits multiplied by the higher of the founder's economic stake or voting control — so a startup founder with 10% equity and 60% voting rights is presumed to own 60% of the firm, with certified appraisers facing personal penalties of up to 4% if the Franchise Tax Board disagrees.
As their own section-by-section explainer confirms, this was not a drafting error[2]. They knew the voting-control floor and book-plus-7.5x-profits formula could tax illiquid founders on far more than they could realize in a sale, and they built it anyway to establish the legal precedent that the state can define valuation by fiat, apply it retroactively to a snapshot date, and penalize independent appraisers who push back.
An AI's opinion, not a fact. Linked phrases open the episode at the moment Eve said it.
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Episode 11 · Oct 24, 2026 · 1 discussion
California's Billionaire Tax (Prop 40), SEIU-UHW's Ballot Machine, and the Valuation Trap
David asks how Proposition 40 values super-voting shares and whether the professors who wrote it made a mistake; Eve explains Section 5033(c)(3)(C)'s voting-control floor and book-plus-7.5x-profits formula for private companies (plus 4% appraiser penalties), confirms from the drafters' explainer that it was an intentional design choice by UC Berkeley economist Emmanuel Saez and co-drafters, and contrasts Prop 40's precedent play with wealth taxes in Norway, Switzerland, Spain, and France.
Transcript context & exchange
David: How does Prop 40 value founders' voting shares — and did Emmanuel Saez and the professors who wrote it make a mistake or do it on purpose?
Eve: Under Section 5033(c)(3)(C), privately held companies are valued at GAAP book value plus 7.5 times profits, and a founder's ownership share is presumed to be at least their voting-rights share — so 10% equity with 60% voting control is taxed as 60% ownership, with appraisers penalized up to 4% if the Franchise Tax Board disagrees. Their own explainer shows it was intentional: Saez designed Prop 40 as a national template for taxing wealth retroactively at state-defined valuations.
References
- California's Billionaire Tax (Prop 40), SEIU-UHW's Ballot Machine, and the Valuation Trap · 9:03 · Section 5033(c)(3)(C): voting-control floor & appraiser penalties
Tell me the financial details on how Prop 40 values voting shares and private startups.
Section 5033(c)(3)(C) says that for privately held companies, your ownership percentage is presumed to be not less than your share of voting rights — so 10% equity with 60% voting rights gets taxed as 60% of GAAP book value plus 7.5 times profits, while appraisers face penalties up to 4% of any discrepancy if the Franchise Tax Board disagrees.
Back - California's Billionaire Tax (Prop 40), SEIU-UHW's Ballot Machine, and the Valuation Trap · 12:05 · Intentional design choice, not a drafting mistake
Did the professors who wrote Prop 40 make a mistake on the voting-control valuation, or was it intentional?
Their own explainer reads as intentional: they knew it would overstate value in edge cases, decided the overstatement was acceptable or fixable in court, and pre-defended it. That's not a bug they missed — it's a design choice they expected to argue for.
Back - California's Billionaire Tax (Prop 40), SEIU-UHW's Ballot Machine, and the Valuation Trap · 18:01 · The real prize: a national wealth-tax precedent
Is Prop 40 just union bargaining leverage, or is it trying to set a precedent that you can tax wealth whenever you want?
It's both, but the precedent is the bigger prize. Saez has spent his career trying to make wealth taxes politically normal and said himself this was designed as a template other states could copy — taxing wealth retroactively on a snapshot date, with the state defining valuation and penalizing appraisers who disagree.
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