Tax on Billionaires in California Estimated at $30 Billion

California's proposed billionaire tax, set to be voted on in November, is estimated by proponents to raise a staggering $100 billion, with 90% of the proceeds earmarked for healthcare initiatives. However, a recent study warns that this could be far from reality.

According to researchers Benjamin Jaros and Joshua Rauh, affiliated with Stanford University's Hoover Institution, the actual figure could be significantly lower. In their analysis, they estimate the tax would collect around $30 billion, a range of $28 billion to $36 billion. This is less than one-third of what proponents expect.

The main reason for this discrepancy lies in the ability of billionaires to relocate from California. The researchers used Forbes billionaire rankings, real estate reports, and public relocation announcements to estimate that nearly 30% of the proposed tax base has already been eliminated due to departures.

The researchers' earlier analysis had projected a $40 billion revenue and a $25 billion net loss for the state. However, their latest estimate puts the potential tax windfall at just $30 billion, which is a significant downward revision.

This new figure raises concerns about what happens after the state collects it. The economists are worried that the losses from billionaire departures could outweigh the one-time wealth tax proceeds.

The researchers have estimated that billionaire departures could cost California between $1 billion and $3.5 billion annually in lost income tax revenue. If these losses continue indefinitely, they would far exceed the potential gains from the wealth tax.

These projections are based on simulations using different revenue and discount-rate assumptions. Notably, 85% of the simulations produced a net loss for the state, indicating that the potential risks may be even greater than initially thought.

The researchers' estimates do not account for individuals who have publicly announced their intention to leave California but may still owe taxes if they remain residents as of January 1, 2026.

California's billionaire tax proposal has sparked intense debate among economists, with some arguing it will generate significant revenue and others warning of potential losses.

A recent study by economists Jasper Boll, Emmanuel Saez, and Gabriel Zucman challenges the notion that billionaires fleeing California would lead to a $100 billion windfall. According to their estimates, even in an extreme scenario where every billionaire permanently left the state, it would take around 25 years for accumulated income tax losses to match this proposed revenue gain.

The authors of this study have revised their earlier estimate of what California billionaires paid in state income taxes in 2025, increasing it from $4.1 billion to $4.3 billion. This revision also critiques the Stanford approach by pointing out that it treats the wealth tax as a one-time payment while considering the migration triggered by the tax as permanent.

However, this perspective is not shared by California's nonpartisan Legislative Analyst's Office, which predicts that the tax will generate tens of billions of dollars over several years. The office also expects the tax to have a relatively minor impact on annual income tax revenue, reducing it by less than $1 billion.

The debate surrounding the billionaire tax proposal comes as the wealth gap in the United States continues to widen. According to Federal Reserve data, the richest 1% of households now hold a record 32.5% of the nation's total net worth, up from 31.1% just one year earlier.

The proposed wealth tax has ignited a heated debate, with tech moguls pouring millions into opposing it and supporting competing ballot initiatives. According to campaign finance disclosures reviewed by a prominent news outlet, these billionaires have collectively raised over $340 million against the measure.

Among the largest donors is Brin, who alone has contributed more than $100 million. Other notable contributors include Eric Schmidt, former Google CEO, Peter Thiel, cofounder of Palantir, Patrick Collison, Stripe's CEO, and Tony Xu, DoorDash's CEO. This massive opposition campaign has already spent a staggering amount on ads and lobbying efforts.

The battle is not only being fought in the streets but also at the top levels of government. California Governor Gavin Newsom, who initially supported the tax, has now switched sides and endorsed Proposition 42, a competing measure funded by Brin that would block retroactive taxes and new state taxes on personal property. This move effectively undermines Prop 40, the original wealth tax bill.

The outcome is far from certain as voters remain divided on the issue. A recent poll found that likely voters are almost evenly split, with 46% in favor of the tax and 43% opposed, leaving room for a potential shift in public opinion before the final vote.

The proposed tax hike in California has sparked a heated debate among residents, with some arguing that it would bring in significant revenue while others claim it would drive away top talent and entrepreneurs. Nvidia CEO Jensen Huang is an example of someone who seems to be willing to pay his share, stating he would comfortably shell out around $8 billion over five years.

The tax's fate will be decided by voters on November 3rd, but even if it passes, its implementation could be delayed due to competing measures and the time-consuming process of determining its impact. Ultimately, the outcome will depend on various factors, including the effectiveness of the tax in generating revenue and its overall effect on California's economy.