A proposed wealth tax in California is facing criticism, with budget expert Kent Smetters arguing that it would be an inefficient revenue tool. Smetters, a Wharton School professor and faculty director of the Penn Wharton Budget Model (PWBM), told Fortune that the measure is "born from a perfect storm of craziness in the current economic and social climate" that makes populist ideas appealing.

Smetters' analysis suggests that taxing the ultra-wealthy in California would not generate the anticipated revenue windfall, particularly as the state grapples with a significant budget shortfall. He attributes this to behavioral economics and the "money illusion," concepts that describe how individuals often make irrational financial decisions based on perceived rather than actual value. The PWBM, widely used in Washington D.C., analyzes the fiscal and macroeconomic effects of federal policies.

The proposed wealth tax has drawn objections from various quarters, including California Governor Gavin Newsom, who, despite having ties to the billionaire class, was raised by a single mother. Tech entrepreneurs such as Anduril founder Palmer Luckey, and Google co-founders Larry Page and Sergey Brin, have also voiced concerns, with some seemingly relocating from the state.

The debate around California's wealth tax highlights the challenges of implementing such policies. One key issue is the potential for wealthy individuals and companies to relocate their assets or themselves to avoid taxation, a phenomenon known as capital flight. This can diminish the tax base and ultimately reduce the revenue generated by the tax.

The concept of a wealth tax is rooted in the idea of addressing wealth inequality and funding public services. Proponents argue that it is a fair way to ensure that the wealthiest members of society contribute their share to the common good. However, critics contend that such taxes can be difficult to administer, may discourage investment and innovation, and could ultimately harm the economy.

The current status of the proposed wealth tax in California remains uncertain. It is likely to face further debate and revisions before potentially being put to a vote. The outcome will depend on a variety of factors, including the state's economic conditions, the political climate, and the effectiveness of arguments both for and against the measure.