California Voters Weigh One-Time Tax on Billionaires

Californians will decide in November whether to approve a one-time 5% tax on billionaires residing in the state on January 1, 2026. The measure, designated Proposition 40, faces opposition from Governor Gavin Newsom and Xavier Becerra, the Democrat running to succeed him, who cite the risk that wealthy residents will relocate to jurisdictions with lower tax rates.

Proponents point to the concentration of wealth among a small group of individuals. One percent of Americans hold more than 31% of the nation's total wealth, totaling $55tn in net worth. A recent research paper found that the 384 wealthiest oligarchs paid 24% of their economic income in 2025, while the average taxpayer paid 30%. Reporting by ProPublica indicated that figures including Elon Musk, Jeff Bezos, Warren Buffett, and Michael Bloomberg live largely tax free.

The proposed levy could generate substantial revenue for the state. As of early October, the Forbes billionaires' list identified 260 billionaires in California with combined wealth of nearly $2.5tn. Based on these figures, the 5% tax would raise approximately $110bn. A portion of these funds is intended to replace Medicaid financing eliminated by the One Big Beautiful Bill Act passed last year.

Six Nobel Prize-winning economists endorsed the measure in an open letter, describing it as the first-ever tax on billionaire wealth enacted anywhere in the world. The letter stated that the vote "may well come to be seen as a turning point in the battle between democracy and oligarchy." The economists also addressed migration concerns, noting the window between the initiative's introduction in late November 2025 and January 1, 2026, was too short for a significant number of billionaires to relocate.

Opposition has been organized by wealthy residents. Google's Sergey Brin has helped coordinate approximately $200m to defeat Proposition 40 and to support two other measures, Propositions 41 and 42. If passed, these measures would bar retroactive taxes and prohibit new taxes on financial assets or other personal property. Some wealthy individuals have already moved business interests or residences out of state, including Brin and Larry Page, Travis Kalanick, and Peter Thiel.

Polling conducted in September showed Proposition 40 receiving support just short of a majority. Economic projections regarding the measure's revenue vary. Economists from Stanford University concluded the tax would raise around $30bn, while the resulting loss of income tax revenue would cost state coffers nearly $39bn in net present value.

Historical data on migration suggests relocation is a concern for high-tax states. In 2001, the federal government eliminated a credit that offset state estate tax burdens for the ultra-wealthy. By 2010, more than a fifth of billionaires in the Forbes 400 list who originally lived in states with estate taxes had moved to states without them, while only about 1% moved in the opposite direction.

Enrico Moretti, an economist at the University of California Berkeley, and Daniel Wilson of the Federal Reserve Bank of San Francisco estimated that by 2017, states with estate taxes had lost 23 of the 72 Forbes 400 billionaires who lived there in 2001. The total Forbes 400 wealth subject to state estate taxes fell from some $203bn in 2001 to about $122bn 16 years later.

The tax rates across states differ significantly. California's top marginal income tax rate is 13.5%, while Florida's rate is zero. Google's Sergey Brin has said Proposition 40 reminds him of the Soviet Union, which he fled with his parents in 1979.