California’s proposed billionaire tax could leave the state $39 billion worse off in today’s money, despite raising an estimated $30 billion initially, according to a study by two Stanford economists.
Proposition 40, which will appear on the November 3 ballot, would impose a one-off 5% levy on the net worth of billionaires who were California residents on January 1 2026. The tax would be due in 2027, although those paying over five years would face a higher total bill.
Benjamin Jaros and Joshua Rauh, economists affiliated with Stanford University’s Hoover Institution, estimate that the measure would raise between $28 billion and $36 billion, with a central estimate of about $30 billion.
That is substantially below the $100 billion forecast by supporters, who say 90% of the proceeds would be directed towards healthcare. Real estate, pensions and most retirement accounts would generally be excluded from the tax.
Why the California billionaire tax could produce a long-term loss
The economists’ central argument is that wealthy residents can leave the state. Using billionaire rankings, property reports and public announcements of relocations, they estimate that departures have already removed almost 30% of the potential tax base.
Seven billionaires who have publicly moved out of California represent roughly $540 billion in wealth, according to the study. Those named include Peter Thiel and Google co-founders Larry Page and Sergey Brin.
The estimate also allows for the possibility that the courts could strike down the tax. An earlier analysis by the Hoover Institution had put expected revenue at about $40 billion and estimated a net loss of $25 billion for California.
The latest study estimates that departures could reduce the state’s annual income tax receipts by between $1 billion and $3.5 billion. If those losses continued indefinitely, the researchers calculate that their present value would exceed the initial wealth-tax proceeds by $38.9 billion.
They reached that conclusion after running 100,000 simulations using different assumptions about revenue and discount rates. About 85% of the scenarios resulted in a net loss for the state.
The figures are projections rather than money California has already lost. A public announcement of relocation also does not by itself establish whether an individual would be liable, because Proposition 40 is based on residency on January 1 2026.
Economists involved in designing the measure have argued that some prominent departures, including Mr Brin’s, may still have left the individuals as California tax residents on that date because of their continuing connections with the state.
The union backing the proposal, SEIU–United Healthcare Workers West, has disputed the research and said the measure is intended to prevent the collapse of California’s healthcare system.
Economists divided over the impact of Proposition 40
A separate study by Jasper Boll, Emmanuel Saez and Gabriel Zucman reached a more favourable conclusion. It said that even if every billionaire permanently left California, it would take about 25 years for the resulting income-tax losses to equal a $100 billion windfall.
The economists later increased their estimate of the state income tax paid by California billionaires in 2025 from $4.1 billion to $4.3 billion. They also criticised the Stanford analysis for treating the wealth tax as a one-off while assuming that migration losses would be permanent.
They argue that, if California does not impose further wealth taxes, some billionaires could eventually return and newly created fortunes could replenish the tax base.
California’s non-partisan Legislative Analyst’s Office has offered a third assessment, forecasting tens of billions of dollars in revenue over several years while putting the possible annual reduction in income-tax receipts at less than $1 billion.
The dispute comes as the richest 1% of US households held a record 32.5% of the country’s total net worth in the second quarter of 2026, compared with 31.1% a year earlier. The bottom half held 2.3%, down from 2.4%.
Opposition to the tax intensifies
Technology billionaires have contributed more than $340 million to oppose Proposition 40 and support rival ballot measures. Mr Brin is the largest donor, giving more than $100 million, while other backers include former Google chief executive Eric Schmidt, Palantir co-founder Mr Thiel, Stripe chief executive Patrick Collison and DoorDash chief executive Tony Xu.
The opposition campaign spent at least $21.2 million during the first 19 days of September.
California Governor Gavin Newsom has also opposed the measure, warning that it could drive wealthy residents and their income-tax payments out of the state. On October 9, he endorsed Proposition 42, a competing measure funded by Mr Brin that would prohibit retrospective taxes and ban new state taxes on personal property.
Proposition 41 is another countermeasure. Either rival proposal could prevent Proposition 40 from taking effect if it receives more votes than the billionaire-tax measure.
Opinion on the tax itself remains closely divided, with one recent poll finding 46% of likely voters in favour and 43% opposed.
Not all wealthy Californians have threatened to leave. Nvidia chief executive Jensen Huang, a long-time resident, has said he would be comfortable paying an estimated $8 billion over five years, describing the ability to do so as a privilege and urging people to move to California rather than leave.
Voters will decide the measure on November 3. Even if it passes, legal challenges and the competing propositions could determine whether it ever comes into force, while its ultimate financial effect may take years to establish.
