The Billionaire Wealth Tax: A Recipe for Economic Disaster
Published June 25, 2026
California’s proposed Billionaire Tax Act would impose a “one-time” 5% tax on the worldwide net worth of individuals with more than $1 billion in assets. Supporters estimate it could raise roughly $100 billion to help address California’s budget pressures, but that projection depends on a static assumption: that billionaires, their assets, and their future income remain in the state.
The evidence suggests otherwise. Once billionaire departures are taken into account, projected revenue falls to roughly $40 billion, before accounting for the loss of regular income-tax revenue from those who leave. The measure would also remove California’s constitutional limit on taxes on intangible property, making future wealth taxes easier to impose. A tax presented as a fiscal solution could instead weaken investment, reduce employment, and erode the revenue base on which the state depends.
Learn more from Joshua D. Rauh:
- Read "The Net Present Value of the Billionaire Tax Act: An Assessment of the Fiscal Effects of California's Proposed Wealth Tax" by Joshua Rauh here.
- Read "Sacramento created California’s budget problem — billionaire tax won’t fix it" by Joshua Rauh here.
- Read "Medi-Cal and One Big Beautiful Bill: Federal Medicaid Reforms and the Fiscal Premise of California's Billionaire Tax Act" by Joshua Rauh here.
Learn more about Joshua D. Rauh here.
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The opinions expressed in this video are those of the authors and do not necessarily reflect the opinions of the Hoover Institution or Stanford University.
© 2026 by the Board of Trustees of Leland Stanford Junior University.
- In 2025, a coalition of California labor unions filed the 2026 Billionaire Tax Act, a ballot initiative intended to impose a one-time 5% tax on the worldwide net worth of individuals with assets exceeding $1 billion. This wealth tax, an annual levy applied to a taxpayer's net worth is usually presented. As a matter of fairness, why not ask the richest households to pay more in order to help the poor once taxpayers and capital respond to a wealth tax? The question is whether the tax can raise the revenue at promises without driving away the wealth, investment and future income. The state depends on savings built from after-tax income are not untapped revenue. Treating them as a fresh tax base means taxing the same dollar twice among advanced economies. The number of countries with individual net wealth taxes fell from 12 in 1990 to four in 2017, California is now putting forth one of the country's most far reaching wealth tax proposals. The proponent's justification is straightforward. The tax is supposedly necessary to help close a $19 billion a year budget hole in California's already underfunded healthcare safety net. The measure is presented as a way to raise substantial revenue from a small number of taxpayers while protecting services for those in need. Yet, the data point to a very different outcome from the policy promises. First proponents claim the tax would raise $100 billion, but billionaires have already been voting with their feet, leaving California, many of them publicly. These departures alone reduce the supposed tax revenue by more than half to a mere $40 billion. Second, as the regular state taxes, such as income tax will no longer be collected from departing billionaires, it tremendously shrinks the existing tax base and means at least a $25 billion tax loss for California in the long run. Third, the retroactivity problem. People could be taxed based on residency decisions made before the law was approved, creating years of litigation over where they actually lived and worked for the state. That means uncertainty over when or whether the revenue will be collected. Fourth, the one-time framing of the proposed tax. Despite the claims of a temporary measure, the act will likely not be a one-time tax in any meaningful sense. It would make a permanent change to California's constitution by removing the state's existing cap on taxes on intangible personal property. Once that cap is lifted, future wealth taxes could be imposed at different rates at different thresholds, and not necessarily only on billionaires. California has seen this pattern before. Proposition 30 introduced progressive income tax rates of up to 13.3% in 2012 as a temporary measure, but those rates were later extended ca. California does not have a revenue problem. It has a spending problem since 2019. California spending has grown 68% faster than revenue, which has only grown 55% with a projected $93 billion shortfall over four years. Policies that distort behavior but generate little or no net revenue gain are not harmless. They can reduce investment, kill jobs, cut income, and shrink the future tax base. When a state tries to tax mobile wealth, it might discover too late that the wealth is already left with jobs and economic opportunities not far behind.