Billionaires Fund Push to Nullify California Wealth Tax

California’s Proposition 40 would impose a one-time 5% tax on assets held by residents with a net worth above $1 billion. Two ballot countermeasures funded by a billionaire-backed campaign would nullify the measure even if voters approve it. Billionaires who could face the tax largely fund the campaign against it.

Google co-founder Sergey Brin says he has moved out of California. He contributed $102 million to Building a Better California, which funds the countermeasures. The Bloomberg Billionaires Index estimated Brin’s net worth at $281 billion that week. If officials found him to have been a California resident on Jan. 1, he could owe as much as $14 billion under Proposition 40, leaving him with $267 billion.

Who Would Pay—and Who Could Leave

The tax would apply to billionaires residing in California on Jan. 1, 2026, while officials would calculate taxable net worth on Dec. 31, 2026. The measure would exempt pensions and most individual retirement accounts. It would include Roth IRA and other Roth-type accounts worth $10 million or more, balances Los Angeles Times Business Columnist Michael Hiltzik said are held almost exclusively by the 1%.

Economist Joshua D. Rauh of the conservative Hoover Institution estimated in a March analysis that the tax would raise about $40 billion in direct revenue. That falls below the $100 billion estimate from wealth-tax advocates Emmanuel Saez and Gabriel Zucman of UC Berkeley. Rauh estimated that billionaires who leave could take as much as $5.8 billion in annual personal income-tax liability with them. His central scenario put the tax’s net present value at a $24.7-billion loss to the state over time.

His calculations ranged widely. Rauh’s estimates ran from a net present-value gain of $46.7 billion to a net loss of $208 billion. Opponents have cited the central scenario to claim Proposition 40 “will cost $25 billion in lost revenue,” Hiltzik wrote. Asked whether that use of his estimates was proper, Rauh said, “it’s completely appropriate for public discourse and conclusions to cite the central scenario.” He added that all wealth-tax estimates face “inherent limitations” and that his estimate “should be understood as an informed range rather than a precise forecast.”

Economist Jeffrey L. Hoopes of the University of North Carolina said, “These responses are necessarily assumptions. The exact magnitude cannot be known in advance — both author groups are predicting the future.” Hoopes said Rauh’s analysis seemed more plausible to him.

Campaign Claims and Political Divisions

Rauh lists 10 billionaires with a combined net worth of $784.5 billion who are known or reported to have left California. Some had left before anyone proposed Proposition 40 and had already taken steps to relocate their residency. Rauh said the total might be a substantial underestimate, citing a Free Press article by Mike Solana, headlined “The Great California Wealth Exodus.”

Solana based his account on conversations with 21 billionaires. He said most planned to leave and all were “developing an exit plan.” He didn’t identify them. Rauh described the interviews as “on-the-record”; Hiltzik argued that interviews with unidentified people aren’t on the record. Rauh told Hiltzik that Solana’s purported interviews “are not part of the analysis” of billionaire flight.

The initiative would let the Legislature change the tax, including extending it beyond one year or applying it to people worth less than $1 billion. Any such changes would require a two-thirds vote in each legislative chamber. Opponents say the state would struggle to administer the tax because officials would have to identify and value taxable wealth. They also argue its retroactivity could invite constitutional challenges.

Service Employees International Union-United Healthcare Workers West placed Proposition 40 on the ballot to help fill a healthcare-program budget gap created by the Republican Congress’ budget bill the previous year. The California Legislature, though dominated by Democrats, hasn’t embraced a wealth tax. Democratic Gov. Gavin Newsom and Xavier Becerra, the Democrat running to succeed Newsom, who is term-limited, oppose the measure. Other unions have been cool to it, prompting internal disputes among organized-labor groups.

Voters must weigh the tax’s fiscal risks and potential effects, along with views about economic inequality and the wealth and influence of billionaires including Elon Musk, Hiltzik wrote. The campaign funding, competing revenue estimates and proposed countermeasures put the question of how California taxes billionaire wealth before voters, along with a second question: whether the measure could take effect if it wins a majority.