California’s proposed billionaire wealth tax is drawing fierce opposition from business leaders and tech entrepreneurs who warn the measure could trigger an exodus of talent and capital from Silicon Valley. The “2026 Billionaire Tax Act,” designed as a ballot initiative, would impose a one-time 5% levy on the net worth of California billionaires, potentially raising approximately $100 billion from over 200 of the state’s wealthiest residents.
According to four academics who helped craft the proposal, the California billionaire tax would assess wealth as of December 31, 2026, with tax residency determined as of January 1, 2026. The Service Employees International Union–United Healthcare Workers West sponsors the initiative, which must gather 875,000 valid voter signatures by late June to appear on the November ballot.
How the California Billionaire Tax Would Work
The tax base covers a broad range of assets including private businesses, publicly traded stock, personal assets valued over $5 million, and retirement accounts exceeding $10 million. However, real estate held directly or through revocable trusts is exempt, a provision designed to avoid conflicts with Proposition 13, which strictly limits California property tax increases.
Billionaires could elect to pay the levy over five years with interest, according to the 32-page description filed with the state attorney general. Those with primarily illiquid assets, such as stakes in private startups, could establish an “Optional Deferral Account” contract with the state, deferring taxes until their holdings are sold or they withdraw cash.
Billionaires Already Moving to Avoid the Tax
Some wealthy Californians have already attempted to relocate before the end of 2025. Larry Page, Google cofounder and largest individual shareholder in Alphabet, reportedly spent $173.5 million on two Miami properties in December as companies associated with him moved out of state.
However, leaving California to avoid taxes is more complicated than simply buying property elsewhere. In September, the California Office of Tax Appeals found Canadian comedian Russell Peters liable for back taxes as a California resident for 2012, 2013, and 2014, despite his Nevada home, driver’s license, and corporations, because he spent more days in California and maintained significant ties to the state.
San Francisco tax lawyer Shail P. Shah notes that California residency rules are “purely subjective.” The state considers whether a taxpayer truly intended to permanently leave and cut ties, which can be difficult for tech billionaires who spent decades building their fortunes in Silicon Valley to establish.
Constitutional Challenges Loom for Wealth Tax
Jon D. Feldhammer, a tax lawyer and partner at Baker Botts’ San Francisco office, says his firm has outlined eight possible constitutional challenges to the law on federal or state grounds. Additionally, the measure faces opposition from California Governor Gavin Newsom and the broader business community.
One major challenge concerns retroactivity—if voters approve the tax in November 2026, it would reach back to billionaires who lived in California as of January 1, 2026. While federal courts have allowed retroactive tax changes, Feldhammer suggests the current Supreme Court might not permit retroactivity for an entirely new tax.
The four professors who drafted the initiative dismiss constitutional concerns, noting that the U.S. Constitution’s prohibition on wealth taxes applies only to federal taxes. States “have long-standing power to tax their residents’ wealth and property, so long as basic due-process rules and other constitutional protections are respected,” according to their expert report.
Economic Impact Disputed by Experts
Critics claim the tax could spark an exodus of tech entrepreneurs, leading to long-term declines in income tax revenues. California already has the highest state individual income tax rate in the nation at 13.3%, and currently receives half its personal income tax revenue from the wealthiest 2% of its population.
Meanwhile, University of Missouri tax law professor David Gamage, one of the four academics behind the proposal, dismisses exodus concerns as “all noise, all talk and very little reality.” The professors estimate that billionaires account for only about 2.5% of California personal income tax revenues because the super-wealthy have numerous opportunities to avoid recognizing taxable income.
In contrast, California’s nonpartisan Legislative Analyst Office concluded the measure would likely cost the state hundreds of millions or more in personal income tax revenue annually. Feldhammer argues this could understate losses if billionaires take their businesses and employees with them.
Concerns Over Tech Industry Revival
Shah warns the real fear is that the billionaire tax proposal could send the wrong message, jeopardizing the recent AI-driven revival of the San Francisco Bay Area from its pandemic-era decline. “There’s this great tailwind that AI has completely revitalized the San Francisco area and everyone is worried a tax hike like this is going to slow the momentum down,” he says.
Feldhammer points out additional concerns, including that startup founders could be billionaires on paper at the end of 2026, yet still owe taxes on that phantom wealth if their company’s value later crashes. Furthermore, founders will have to sell shares to pay the wealth tax, then owe combined 37.1% federal and California capital gains taxes on those proceeds, requiring even more share sales.
The proposal includes numerous provisions designed to prevent billionaires from undervaluing or excluding assets. Private businesses would be valued at their book value plus 7.5 times annual book profits, but not less than their last funding round valuation. Personal assets like art and jewelry would be valued at no less than their insured value.
The initiative must clear several hurdles before becoming law, including certification by the state and gathering sufficient voter signatures by late June. If approved by voters, the tax would face well-funded legal challenges from its intended targets, though the drafters have attempted to preempt many constitutional objections in their proposal design.
