Two of the country’s most influential economists stepped onto a UC Berkeley stage earlier this month to debate one of California’s biggest political and economic questions: Should billionaires pay more to help fund healthcare?
Hosted by the Berkeley Political Union and co-sponsored by the Young America Foundation and the James M. and Cathleen D. Stone Center on Wealth and Income Inequality at UC Berkeley, the “Clash of the Titans” debate brought together Berkeley Economics Professor and Stone Center Director Emmanuel Saez — one of the world’s leading researchers on wealth inequality — and Arthur Laffer, the conservative economist best known for advising President Ronald Reagan and helping shape the tax-cutting philosophy that transformed modern Republican economics.
At the center of the debate — which was moderated by Berkeley Economics Professor Alan Auerbach — was California’s proposed billionaire wealth tax, a controversial plan that supporters say could help stabilize healthcare and other public programs at a time of widening inequality and deep budget pressures.
But beneath the policy details was a much larger argument about what California’s economy should look like and who should shoulder the burden when the state faces rising costs, shrinking public services and growing frustration over affordability.
Saez argued that California’s billionaire class has experienced an extraordinary surge in wealth in recent years, fueled largely by the explosive growth of the tech and AI industries, while many ordinary Californians continue to struggle with housing, healthcare and stagnant wages.
“Right now, most billionaires are paying around 0.2% of their wealth in California individual income tax,” Saez said. “This proposal would be about 1% over five years. It’s a way to begin addressing extreme wealth inequality and urgent public funding needs.”
The proposed wealth tax would place a one-time tax on billionaire wealth to help fund healthcare programs after recent federal cuts to Medicaid and other social programs. Saez framed the measure as less of a political statement and more of an emergency response to what he described as a rapidly widening gap between the ultra-wealthy and everyone else.
“Over the last three years, California billionaire wealth has more than doubled,” Saez said. “Meanwhile, average family income has only grown by about 2% per year. That’s an example of the extreme wealth inequality we’re seeing in California.”
Saez also argued that billionaires currently pay very little on unrealized capital gains, allowing those fortunes to go largely untouched while public programs face cuts. He emphasized that even a relatively small tax on billionaire wealth could raise more than $100 billion for California. The proposal, he noted, is a necessary emergency response to widening inequality and cuts to public services.
“The ‘Big Beautiful Bill’ passed by Trump includes large cuts to programs like Medicaid,” Saez said. “The United States is the only high-income country with such a significant number of uninsured people. These cuts will make healthcare even harder to access, especially for vulnerable populations.”
Laffer pushed back on the tax proposal, warning that California risks damaging its economy by targeting the very people driving investment and job creation. Throughout the debate, he returned to a core principle that has defined his economic philosophy for decades: economies grow when governments encourage investment, not when they redistribute wealth.
“By taking from those who have a little bit more, you reduce their incentives to produce, and they will produce a little bit less,” said Laffer. “When you give to those who have a little bit less, you’re providing them with an alternative source of income other than working, and they too will produce a little bit less.”
The two economists also discussed the history of taxation in the U.S. Saez argued that the country experienced broad prosperity during the decades of more progressive taxation before the Reagan era, when wealth was distributed more evenly and public investment was stronger. Laffer responded that Reagan-era tax cuts helped lower unemployment and expand economic growth, even if wealth inequality increased at the same time.
“There are lots of ways of making the rich pay their fair share,” said Laffer. “Get rid of the deductions. Broaden the tax base by taking increases and unrealized capital gains. Tax inheritances. Also make sure you don’t do the 1030 exchanges. By doing that, you can get more revenue than you’d ever dreamed.”
Despite their opposing viewpoints, both economists acknowledged that California faces serious economic pressures. But they offered completely different solutions.
For Laffer, the solution remains lower taxes, stronger incentives for investment and policies designed to encourage economic growth. For Saez, the answer is greater public investment funded in part by the ultra-wealthy.
“Billionaires should contribute proportionally to the state that built them,” Saez said. “We want them to participate fully in supporting the public systems that made their success possible.”
Watch the debate here