To many, the 5 percent wealth tax on California’s ballot this year may sound like a harmless way to raise money, a proposal only billionaires would dislike. Yet leaders from across the political spectrum oppose the plan, including Planned Parenthood Affiliates of California, the California Teachers Association and Gov. Gavin Newsom, a Democrat.
The critics are right. A quick look at the math underpinning the proposal, which would tax the accumulated assets of ultrawealthy Californians, shows that the first net wealth tax in modern U.S. history would provide the state little and endanger its economic core.
Other countries have made the same mistake Californians are being tempted to commit. In 1990, 12 industrialized countries levied a wealth tax. By 2025, nine countries had repealed theirs — including Denmark, Sweden, Germany, the Netherlands and France. These nations discovered that wealth taxes are hard to implement, cause wealthy people to move and take their money elsewhere and raise far less tax revenue than promised. The co-authors of the tax plan must know this history well: France, their home country, abolished its wealth tax in 2018 after an estimated 200 billion euros (about $228 billion) left the country over two decades and, according to estimates, the tax generated an annual budget shortfall of 7 billion euros.
All of the things that happened in France would happen in California, and the consequences would probably be worse.
We looked at 212 California billionaires the tax would target, and we estimate that the proposed wealth tax would raise just $40 billion for the state — not the $100 billion its backers claim. Several of California’s highest-profile billionaires, including the Google co-founders Sergey Brin and Larry Page, left California before Dec. 31, 2025. (The tax would apply to billionaires living in California as of that date.) Some 30 percent of the state’s billionaire wealth tax base departed before the residency deadline, significantly cutting into the amount the tax could possibly raise.
Driving out some of the state’s most successful residents will have grave consequences. Every billionaire that left the state also took with them a stream of income tax revenue that would have grown over time and continued indefinitely. The billionaire flight is likely to be worse than what European nations saw, because moving out of state is easier than relocating to a new country.
True, California’s proposed wealth tax is, on paper, a one-time levy. In theory, this would limit the number of billionaires who move, and perhaps lead some to come back after it is imposed. But even some of the plan’s most fervent advocates acknowledge that the tax, once approved, isn’t likely to be enforced only once. The state has imposed other temporary taxes that became or may become permanent, and it’s doubtful this one would be an exception.
One rationale for the supposedly one-time measure is that the state needs to fill an emergency gap in the California Medicaid program, which is in line to lose substantial amounts of federal funding. But two-thirds of the reduction will hit after 2030, when a one-time tax’s revenue would be exhausted. The state would have to enforce the tax more than once to help when the budget crunch really begins to hurt.
Billionaires certainly expect to be hit again and again with wealth taxes if they remain in California; they continued leaving the state after the residency deadline passed. If California voters approve the ballot measure, late-leavers might have to pay a one-time tax bill — but many will not stay to see how many more similar bills might come due later.
This is why the state’s nonpartisan Legislative Analyst’s Office warned that the measure would cause a “likely ongoing decrease in state income tax revenues.” We calculated how much: Factoring in the loss of the income taxes that California’s departing billionaires would have paid, our best estimate suggests that the wealth tax would leave California worse off by about $25 billion. The state would lose money in 71 percent of the scenarios we evaluated. Even in the net positive revenue scenarios, the state would not raise enough money to justify the tax’s many risks.
When corporate founders leave, hiring decisions tend to follow. Silicon Valley and other drivers of the state’s prosperity are not guaranteed to remain the unique and vibrant economic powerhouses they have been. The share of Californians employed at the state’s anchor companies has fallen steadily since 2015. Across the sectors those firms dominate, such as the booming technology industry, as many as a quarter of a million jobs have gone to other states. Imposing a wealth tax would accelerate this trend.
Mr. Newsom often boasts that California has the fourth-largest economy on earth, in large part because its position as a global center of the innovation-based economy. Blowing a long-term hole in the state budget and chasing out business leaders who have helped power the state’s strong economy and jobs climate for decades is surely why he and a growing coalition of leading California health care and education groups oppose the tax.
They, too, know that there is nothing new under the California sun; reviving this outdated experiment would be a fiscal and economic disaster.
Joshua Rauh is the George P. Shultz senior fellow in economics and Benjamin Jaros is a research fellow at the Hoover Institution at Stanford University.
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