California’s proposed one-time billionaire wealth tax faces intense scrutiny. Critics, including those ultra-rich who’ve already left, and even the Trump administration, argue it will drive away more billionaires. They claim this will eventually deplete state tax revenue. This tax, on the November ballot, targets roughly 200 California billionaires. It demands a one-time 5% levy on their total wealth. Proponents seek $100 billion in extra revenue over five years. Much of this money would offset healthcare funding losses, tens of billions, due to federal cuts.
However, these criticisms may not sway the tax’s architects. Even if every single wealthy Californian abandoned the state, it would take years to validate such protests. The state would likely still benefit, for a while at least. Last year, California billionaires paid $4.1 billion in income tax. This represents a mere 0.2% of their over $2 trillion collective net worth. These findings come from a Monday working paper by National Bureau of Economic Research (NBER) researchers. Therefore, even if every billionaire ghosted the state overnight, it would take 25 years. That’s how long it would take for lost income tax revenue to equal the $100 billion windfall from the wealth tax over five years.
Only six prominent billionaires publicly confirmed leaving before January 1st. That was the proposed tax’s residency change deadline. Peter Thiel, the venture capitalist, moved to Florida. Google cofounders Larry Page and Sergey Brin also departed. Other notable leavers include lending magnate Don Hankey, now in Nevada. Former Uber CEO Travis Kalanick resides in Texas. Hollywood director Steven Spielberg now calls New York City home.
More ultra-wealthy individuals have announced their departure since the cutoff date. Meta CEO Mark Zuckerberg is one. David Sacks, venture capitalist and former Trump tech advisor, is another. While these individuals take significant wealth, it hasn’t been a mass exodus. This bodes well for state finances in the near term if the proposal passes. The NBER paper calculated a scenario: if only one-quarter of California’s billionaires left. It would take a century for lost tax revenues to match the one-time wealth tax’s $100 billion injection.
