According to Forbes, California’s latest wealth tax proposal targets only about 200 billionaires with a one-time 5% levy on their net worth in the 2026 tax year. The measure could raise approximately $100 billion to address healthcare and education funding gaps created by federal spending cuts. Real estate holdings would be exempt, but most other assets including private company shares and investment portfolios would be subject to the tax. Supporters need 870,000 signatures to get the Billionaire Tax Act on the ballot, and the tax could be paid over five years if passed. This follows failed 2020 proposals that included a 0.4% wealth tax affecting 30,400 Californians.
Administration nightmare
Here’s the thing about wealth taxes – they’re incredibly difficult to administer. Unlike income taxes where you’re dealing with actual cash flows, wealth taxes require valuing everything someone owns. And we’re talking about billionaires here, so their assets aren’t just publicly traded stocks. What about private company shares? Stock options? Complex partnership interests? You can bet there will be massive valuation disputes between taxpayers and California’s notoriously aggressive Franchise Tax Board. The proposed legislation tries to address this, but valuation fights could eat up much of the projected revenue in legal battles.
Exit risk
California already has a taxpayer exodus problem. When Elon Musk left, he specifically cited taxes and regulation as reasons. Now we’re talking about hitting people with a 5% tax on their entire net worth – that’s potentially billions of dollars for some individuals. Do we really think they’ll just stick around and pay? Sure, the tax only applies to people living in California during the 2026 tax year, but wealthy people have the resources to establish residency elsewhere. They’ve done it before, and they’ll do it again. The state has already seen significant revenue loss from high-net-worth individuals leaving – this could accelerate that trend dramatically.
Precedent concerns
Look, California often sets trends for other states. If this passes, how long until other high-tax states start considering similar measures? And once you open the wealth tax door, what’s to stop future legislatures from expanding it beyond billionaires? The campaign website emphasizes this is a one-time tax targeting only the ultra-wealthy, but tax policies have a way of expanding over time. Remember when the federal income tax was only supposed to affect the richest Americans? Now it touches nearly everyone with earned income.
Political reality
So will this actually pass? The previous 0.4% wealth tax proposal failed, but this one is different in key ways. It targets far fewer people – 200 versus 30,400 – which makes it easier to sell politically. Most Californians aren’t billionaires, so they might see this as someone else’s problem. And the one-time nature makes it more palatable than an annual wealth tax. But the administrative complexity and exit risk are real concerns that opponents will hammer. Basically, we’re about to see whether Californians believe the potential revenue is worth the risks.
