California’s Billionaire Tax Is Already Making It Poorer

Even before voters weigh in, the proposal is already backfiring.

Courtesy Lala Miklós/Unsplash.

“Good riddance.” That was the response from one California commentator when several billionaires announced plans to leave the Golden State late last year to avoid a proposed “billionaire tax.” The ballot measure, which voters could be asked to approve this fall, would impose a one-time 5 percent tax, payable over five years, on all California residents with a net worth exceeding $1 billion and who resided in the state as of January 1, 2026.

When reports emerged in December 2025 that venture capitalist Peter Thiel and Google co-founder Larry Page were preparing to relocate to avoid the tax, San Francisco Bay Area Representative Ro Khanna joked that he would “miss them very much.” Others insisted that even if a few billionaires departed, the tax would still deliver a windfall for the state.

They may want to reconsider. A recent study led by Stanford economists for the Hoover Institution finds that the measure will collect significantly less revenue than its supporters promised. Worse, the permanent loss of future income-tax payments from departing billionaires could end up costing California far more than the wealth tax ever collects.

That poses a problem for the proposal’s backers, including the Service Employees International Union–United Healthcare Workers West, which is sponsoring the initiative. In support of the tax, they point to an expert report by pro-wealth tax economists, who estimated it would raise $100 billion.

The measure’s proponents acknowledge the risk of capital flight. Their revenue projections assume what they call a “relatively small avoidance rate” of about 10 percent, reflecting the possibility that some billionaires might leave to escape the tax. Starting with an estimated $2.2 trillion in wealth held by California billionaires, as measured by the Forbes billionaire list, and adjusting for that avoidance assumption, they arrive at a $100 billion revenue estimate.

But as the Stanford study shows, that assumption is already obsolete. By January 1, just six publicly confirmed departures—Thiel, Page, Google co-founder Sergey Brin, film producer Steven Spielberg, financier Don Hankey, and venture capitalist David Sacks—removed an estimated $536 billion in wealth from California’s tax base. In other words, about a quarter of the act’s wealth-tax base has already vanished before the initiative had even qualified for the ballot.

After correcting for those exits and removing several billionaires that the proponents mistakenly included in their base (such as Oracle founder Larry Ellison, who left California in 2020), the Stanford researchers estimated the measure would collect roughly $40 billion—less than half the proponents’ headline $100 billion figure.

That, too, might be undercounting the total number of billionaires who have exited. In a recent essay for Pirate Wires, Mike Solana interviewed 21 billionaires and found that nearly all of them have either left or are planning to leave California.

Even with the wealth tax, California’s overall fiscal situation may take a big hit from the departures. Billionaires are among the Golden State’s largest taxpayers, paying an estimated $3.3 to $5.8 billion in state income taxes annually, according to the Stanford study. The researchers found that the present value of those lost future tax payments could exceed what the wealth tax would collect. That would leave California poorer overall.

California’s Legislative Analyst’s Office reached a similar conclusion. It found that, while the measure could generate a “temporary increase in state revenues,” it would also likely cause an “ongoing decrease in state income tax revenues of hundreds of millions of dollars or more per year.”

Administering the tax itself could also cost tens of millions of dollars annually because of the complexities of valuing privately held assets. Wealth taxes require governments to estimate the market value of assets—such as private companies, venture investments, and other illiquid holdings—that often have no clear price. Determining how much tax a billionaire owes—and enforcing that obligation—could involve years of litigation.

Even if voters reject the measure, the uncertainty it has created may have lasting consequences. California’s ballot-initiative process allows similar proposals to return again and again. Individuals deciding where to build companies or make long-term investments will weigh not only the current proposal but also the possibility that similar measures could reappear in future election cycles.

In a country where states compete for residents, capital, and entrepreneurship, the response can be swift. By the time California voters weigh in on the proposal this fall, a significant share of the tax base the initiative was designed to capture may already be gone. That will leave California poorer—even if the wealth tax passes.