Can A 5% Wealth Tax On 200 Billionaires Save—Or Sink—California?”

Californians have recently proposed the so-called “2026 Billionaire Tax Act”. Under this act, California will institute a one-time 5% wealth tax on California billionaires. The purpose of this act is to address the mounting health care and education costs that the state faces. While this initiative would raise an estimated $100 billion in incremental tax revenues over the next five years, it is not without costs. In this article, I outline the 2026 Billionaire Tax Act and discuss the pros and cons of the proposal.

California’s 2026 Billionaire Tax Act

On October 22, 2025, Jim Mangia, president and CEO of St. John’s Community Health, and Suzanne Jimenez, who represents the SEIU-UHW (a prominent union of healthcare workers in California), filed the 2026 Billionaire Tax Act. This filing will now collect signatures to be added to the ballot during the next major voting cycle in November of 2026.

The primary change that residents will vote on will be to enact a 5% tax on wealth for California residents who have over $1 billion in wealth. For instance, Forbes estimates Mark Zuckerberg’s (chairman, chief executive officer, and controlling shareholder of Meta) wealth to be $209.4 billion. This means that Zuckerberg’s one-time wealth tax would be in excess of $10 billion.

According to a fact sheet produced by the SEIU-UHW union, this proposal would apply to the estimated 200 billionaires living in California, and it would raise $100 billion in incremental taxes. Their tax collection efforts are being labeled as an emergency as the state is facing substantially higher healthcare and education costs. The collected funds would be allocated 90% to addressing healthcare costs and 10% to addressing education costs. By imposing this tax, the proposal estimates that the shortfall would be addressed.

The specific mechanism of this proposal would be a 5% tax on all wealth for billionaires with wealth over $1.1 billion. The wealth-tax rate would decline for wealth under $1.1 billion incrementally, with taxpayers with wealth under $1 billion not facing any incremental tax liability.

The tax applies to the taxpayer’s tangible and intangible property, such as stocks, other business ownership, bonds, and collectibles (among other assets). Taxpayers can factor in their indebtedness in this calculation. They can also exclude certain assets like pensions and retirement accounts, interest in real property, tangible property located outside of California, and up to $5 million in the value of assets that include art, financial instruments, vehicles, and other personal property. However, the taxpayers are expressly prohibited from making outlandish donations to charitable organizations to avoid paying the wealth tax.

Why California Should Implement The 2026 Billionaire Tax Act

Holding everything constant, if these 200 California billionaires paid 5% of their wealth to California in the form of a wealth tax, two important things would occur: (1) California would address their healthcare and education crises without imposing taxes on the vast majority of their population, and (2) the billionaires would continue living their life without a noticeable change in their assets.

Regarding the first point, California has nearly 40 million residents. The proposal suggests that a tax on just 200 of these people could address two significant concerns. Put differently, a tax on just 0.00005% of the population would address a significant set of problems facing all of California.

Regarding the second point, California billionaires tend to own superfluous assets. For instance, Zuckerberg owns 11 homes in Palo Alto, California, according to the New York Times. Many would argue that if he had to sell one or two of his homes, his life would not be materially impacted.

Why California Should Not Implement The 2026 Billionaire Tax Act

The most common issue raised by skeptics of wealth taxes is “capital flight”. As discussed in a Tax Notes article, “such a tax would signal to wealthy taxpayers that they should reside elsewhere.” This article goes on to discuss that high-income taxpayers pay the majority of state income taxes in California, and even if a small number of those individuals leave, it could lead to long-term tax collection consequences.

This concern has been underscored by numerous academic studies. Most recently, an NBER working paper co-authored by Jakobsen, Kleven, Kolsrud, Landais, and Munoz finds that 1 one percentage-point increase in the top wealth tax rate in Sweden and Denmark leads to an outward migration of wealthy taxpayers by two percent. Other work in the American Economic Review by Moretti and Wilson documents that variation in jurisdictional taxes significantly influences the location of talent, suggesting that higher tax burdens lead individuals to relocate.

Anecdotally, we can look no further than Jeff Bezos (founder of Amazon), who moved from Washington to Florida in 2023. Even though he has many non-tax reasons to make this move, the move just so happened to coincide with Washington proposing a 1% wealth tax on individuals with over $250 million in total assets. Different from California, Washington is already a very competitive state as it comes to overall tax liabilities. As high-income Californians face the highest level of state income tax liability, this proposed wealth tax could be the straw that breaks the camel’s back toward their relocation decision.

While the proposal argues that these Californians made their money due, in part, to the people of California, and the billionaires should pay some of that money back in the form of the wealth tax, that argument has not worked in the past. For instance, according to the LA Times, Elon Musk’s companies received hundreds of millions of dollars in California subsidies only for him to leave for Texas. If even a small number of the current California billionaires follow his lead in response to the proposed wealth taxes, not only would California not be able to collect $100 billion in incremental revenue, but it could also end up in a situation where the state is worse off financially. This point runs tangential to concerns I have raised in a Forbes contributor piece about Zohran Mamdani’s vision to raise taxes on the wealthy and how this tax might lead to those taxpayers relocating outside of the city.

In addition to concerns surrounding capital flight, there are numerous other concerns with imposing a wealth tax. For starters, it can be very difficult to value a taxpayer’s wealth. Naturally, a stock and securities portfolio maintains accurate valuations on a regular basis. However, real estate assets have much looser valuations, and some assets like artwork require professional assessments. When considering the entire portfolio of assets for California’s billionaires, it remains unclear as to how expensive it might be to value a taxpayer’s wealth accurately, not to mention how long it will be litigated once that taxpayer inevitably argues the valuation. Additionally, enforcing a wealth tax can create liquidity problems for taxpayers as they might have to sell assets to meet the tax liabilities, and it could lead to substantial tax planning that results in the taxpayers gaming the system, and thus, the proposal would not have the intended effect.

While the 2026 Billionaire Tax Act in California is still just a proposal, it seems plausible that it could end up on the November 2026 ballot. The benefits are clear in that California needs an infusion of cash, and they can turn to just 200 individuals to pay it. In fact, if these individuals are loyal to their home state and want to take care of the people who helped build their wealth, the billionaires should delight in the opportunity to help out California. However, academic literature tells us that this is unlikely to be the outcome, potentially leaving California in a worse place financially than if it does not impose a wealth tax. Accordingly, California Governor Gavin Newsom has shut down past wealth tax proposals, according to Tax Notes, suggesting that this proposal might not have as strong of a future as hoped.