California's billionaire tax proposal draws $100 billion vs. $39 billion revenue estimates

California voters will decide on November 3, 2026, whether to approve Proposition 40, a measure that imposes a one-time 5% tax on the net worth of billionaires who were state residents on January 1, 2026. The proposal seeks to raise funds primarily to offset federal cuts to Medicaid for low-income Californians. Economists disagree sharply on whether the tax will fill the state budget or drain it.

Gabriel Zucman, an economist at UC Berkeley and the Paris School of Economics, co-authored an analysis estimating the measure would raise approximately $100 billion. Zucman and colleagues Jasper Boll and Emmanuel Saez calculated that billionaire wealth in the state reached $2.3 trillion by mid-2026. They applied the 5% rate to that figure and reduced the total by 10% to account for potential avoidance and evasion. Zucman argued that the tax addresses a flaw in the current system where the super-wealthy generate little taxable income.

Joshua Rauh, a senior fellow at Stanford University's Hoover Institution, presented a contrasting view in a study co-authored with Benjamin Jaros. Rauh estimates Proposition 40 will cost the state $39 billion. He argues that the tax will trigger an exodus of billionaires, damaging the state's economy and eroding the income tax revenue California currently collects from these individuals. Rauh noted that the tax's novelty and conservative Supreme Court majority create risks that parts of the measure could be struck down.

A central point of contention involves seven high-profile billionaires who left the state before the January 1, 2026, cutoff: Larry Page, Sergey Brin, Peter Thiel, Don Hankey, Steven Spielberg, Travis Kalanick, and David Sacks. Rauh claims these departures remove approximately $30 billion in potential revenue from the tax base. Zucman disputes this, citing legal experts who believe these individuals did not successfully sever their California tax residency. He pointed to Sergey Brin, who moved to Nevada but still commutes to Silicon Valley, as evidence that a change of address does not equal a change of tax status.

Both sides acknowledge that past wealth taxes in countries like France and Norway have faced challenges with loopholes and resident migration. Proponents of Proposition 40 argue the new design closes these gaps by taxing business holdings and applying the fee retroactively to assets held worldwide. Critics warn that the retroactive nature and global reach of the tax invite constitutional challenges regarding due process and valuation of private companies.

The financial stakes of the debate extend beyond California. A group supporting the defeat of the proposition has raised $333 million from the super-wealthy, according to a recent report in The New York Times. This funding reflects fears that the California measure could serve as a model for national or international wealth taxation policies.