Forget California, billionaires could leave the US entirely amid wealth tax talk
How much could a state tax a billionaire before he decides to move his money elsewhere? California, whose voters will decide next fall whether to tax the state’s ultra wealthy to fund health care for low income residents, might find out as soon as the new year.
Multiple news outlets are reporting on the machinations of the state’s billionaires seeking to ensure they’re not in the crosshairs before the tax man reaches for the 2026 calendar. One adviser to many high-net-worth individuals told Straight Arrow News that some of his clients are considering planting their flag of residency abroad.
The ballot measure
Barring any successful court challenges, voters in November 2026 will decide on a one-time 5% tax on state residents’ whose net worth surpasses $1 billion. The tax would target the overall net worth of anyone living in California for any period of time after Jan. 1, 2026, and be payable over the following five years.
Filed in October by Jim Mangia, president and CEO of St. John’s Community Health, and backed by the Service Employees International Union-United Healthcare Workers West (SEIU-UHW), the “California Billionaires Tax Act” is estimated to raise $100 billion that would fill a “revenue hole” left by federal budget cuts.
Reforms to Medicaid reimbursements enacted in July are estimated to cost California nearly $1 trillion over the next decade unless the state allows millions of low-income families to lose their Medi-Cal coverage.
“We’re calling on California’s billionaires to step up and pay a one-time, emergency 5% tax to prevent the collapse of California health care and help fund K-12 public education,” the union said in its announcement of the measure. “This would protect health care jobs and ensure working people and families can get the care they need.”
The tax differs from income taxes that levy a percentage on how much an individual or business makes in a given year. The union estimates nearly 200 billionaires live in California and would be subject to the tax if it succeeds in the November 2026 election. According to Bloomberg, four of the 10 richest people on Earth live in California.
Mitigation
Facing the threat of a one-time tax worth billions of dollars, The New York Times cited anonymous sources saying Google co-founder Larry Page and investor Peter Thiel are actively migrating their money out of the Golden State before the ball drops on Wednesday night.
Page, worth roughly $258 billion, would owe nearly $13 billion. Thiel’s tax bill would surpass $1.2 billion.
Anduril founder Palmer Luckey said in a response to a social media post from California Rep. Ro Khanna, a Democrat, that the ballot proposition would force his ventures to liquidate.
“You are fighting to force founders like me to sell huge chunks of our companies to pay for fraud, waste, and political favors for the organizations pushing this ballot initiative,” Luckey posted on Sunday. “I made my money from my first company, paid hundreds of millions of dollars in taxes on it, used the remainder to start a second company that employs six thousand people, and now me and my cofounders have to somehow come up with billions of dollars in cash.”
Not just California
David Lesperance, who leads a firm of international tax and immigration advisers, described California’s wealth tax as an “own goal” fiscal mistake.
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The top 1% of U.S. earners earn roughly 19.5% of all income but pay 37% of total income taxes.
“The (ultra high net worth) targets of this proposal are the most mobile group of taxpayers and are already bolting the state before the wildfire because they see ‘Tax the Rich’ proponents playing with matches,” he told SAN.
Lesperance said the same group sees similar calls for net worth taxation occurring in Washington D.C., putting a potential move out of the country in play.
“When we speak, I also share the proposals put forth by leading Democratic voices like Senators Warren and Wyden and Representative [Alexandria Ocasio-Cortez], Ro Khanna and Dan Goldman and remind them that the next U.S. general election is less than three years away,” he said.
Sen. Elizabeth Warren, D-Mass., has regularly introduced a version of the Ultra-Millionaire Tax Act with each new congressional session. Her bill would install a 2% tax on overall wealth above $50 million in a manner similar to California’s ballot measure, along with another 1% annual tax on households and trusts with a net worth above $1 billion.
“For decades, a small group of families have raked in a massive amount of the wealth American workers have produced, while America’s middle class has been hollowed out,” Warren said in a March 2024 release. “The consequence is an extreme concentration of wealth not seen in any other leading economy.”
The Penn Wharton Budget Model examined Warren’s proposal. While the group estimates the proposal could bring in nearly $3 trillion in federal revenue in a decade, it would also reduce capital by 3.1%, average hourly wages by 1.2%, and GDP by 1.2% in 2050. California’s Legislative Analyst’s Office found the ballot proposition would have a similar effect.
Many of Lesperance’s clients are company founders who he said passed on a steady paycheck to take on significant risk in pursuit of a long-term reward.
These clients recognize that luck, like being in the right place at the right time is a factor, Lesperance told SAN. But, he noted, “they also believe in Louis Pasteur’s famous saying ‘Chance favours the prepared mind.’”
For some, California in 2026 might no longer be the right place or the right time, as Lesperance noted that being taxed on what may or may not happen in the future “is abhorrent to many. It also cripples their efforts by depriving their business of the oxygen of liquidity.”
In terms of cost or difficulty, Lesperance described the price of moving to protect vast sums of wealth as a “rounding error.”
Monetary tremor
California’s wealthiest 1% pay 38% of all state income taxes. According to IRS data, 175,045 households pay more than $122 billion, or 38%, of all state income taxes. Its corporate tax, including capital gains, brings in so much revenue that companies paying tax bills can result in surprise surpluses.
In highly progressive taxation locales like California, one of these “super earners” leaving can move the state’s revenue needle.
Tesla founder Elon Musk announced in late 2020 that he’d sold personal property in California and moved to Texas, a state without income or capital gains taxes. The move cost California billions of dollars.
When billionaire hedge-fund manager David Tepper left New Jersey for Florida a decade ago, it forced budget analysts to admit their revenue forecasts would need updating.
States with flat or no income taxes aren’t immune.
Amazon founder Jeff Bezos stopped selling stock shortly before Washington state’s capital gains tax took effect. He resumed just weeks after he changed his residency to Florida. Like Tepper had said about his move, Bezos wanted to live nearer to family. The move saved him more than $1 billion in taxes he’d have paid in Washington.
Billionaire investor Ken Griffin established residency in Florida and began moving his companies’ headquarters from Chicago to Miami in 2022. The Republican donor cited crime in the city and high taxes as reasons for his move. Before his move, Griffin was the wealthiest person in Illinois.
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Ella Rae Greene, Editor In Chief
