Wealth Taxes Are Driving Money Out of China and California

Wealth taxes in China and California are prompting affluent households to curb luxury spending or move portable assets and capital elsewhere.

• China’s July 24 rules impose a 20% tax on assets placed in, income earned through, or distributions from offshore trusts, with a repayment deadline of October 22 for earlier income.
• Chinese consumers represent roughly one-fifth of global luxury purchases, but third-quarter sales in Asia outside Japan fell 5%, mainland China declined by double digits, and Chinese gold, silver and jewelry retail sales dropped 17.5% year over year in August.
• LVMH, Hermès and Kering have lost approximately €300 billion in combined market value this year; since the July 24 announcement, LVMH fell 17% and Hermès 23%, while portable luxury such as watches and jewelry remained more resilient.
• California’s proposed Proposition 40 would impose a one-time 5% tax on the wealth of about 200 billionaires and trusts; estimates put likely revenue near $40 billion rather than the proponents’ $100 billion, with migration potentially leaving the state $25 billion worse off.
• The market review adds that California lost nearly $12 billion of net income to other states between the 2022 and 2023 tax years, while Florida gained more than $20 billion; it also covers airline, freight and luxury-stock developments including Delta’s 82.5% September on-time rate and Boeing’s 161 third-quarter deliveries.

Takeaway: The author concludes that aggressive wealth taxation can weaken luxury demand and drive capital and residents toward more accommodating jurisdictions, although the broader airline and market data show areas of resilience and continuing sector-specific risks.