California Proposes One-Time 5% Tax on Billionaire Wealth

California placed a one-time 5% wealth tax on roughly 200 resident billionaires on the November ballot. The levy would raise an estimated $100 billion over five years, with most revenue directed to cover projected health-care funding shortfalls caused by federal reductions.

A working paper released Monday by National Bureau of Economic Research economists calculated that the state's 239 billionaires paid $4.1 billion in state income tax last year, equal to 0.2% of their combined net worth exceeding $2 trillion. Under an extreme scenario in which every billionaire left the state immediately, the lost annual income-tax revenue would take 25 years to equal the proposed one-time wealth-tax total.

Six billionaires publicly changed residency before the January 1 cutoff, including venture capitalist Peter Thiel, Google cofounders Larry Page and Sergey Brin, lending executive Don Hankey, former Uber CEO Travis Kalanick, and director Steven Spielberg.

Additional departures after the cutoff include Meta CEO Mark Zuckerberg and venture capitalist David Sacks. The same NBER analysis found that if only one-quarter of California billionaires left, it would take a century for lost income-tax collections to offset the $100 billion wealth-tax windfall.

Billionaire wealth in the state has grown 30-fold over the past 40 years while total household wealth doubled.

The proposed levy would be collected as an annual 1% payment for five years. More than 80% of billionaire wealth remains in unrealized capital gains and is therefore not subject to current income tax. California Gov. Gavin Newsom has warned the measure could reduce the state's appeal to high-income residents.