California Billionaire Tax Faces $110 Billion Test

California voters will decide in November whether to enact the world’s first one-time tax on billionaire wealth. Proposition 40 proposes a 5% levy on the assets of individuals residing in the state on January 1, 2026. The measure targets the 260 billionaires currently living in California, who hold nearly $2.5 trillion in net worth. If passed, the tax would generate approximately $110 billion in revenue.

The funds are earmarked primarily to replace Medicaid funding eliminated by the federal One Big Beautiful Bill Act enacted last year. The proposal aims to address the gap between wealth and income tax liability among the ultra-rich. A recent study found that the country’s 384 wealthiest individuals paid only 24% of their economic income in taxes in 2025. This figure is lower than the 30% rate paid by the average American taxpayer.

Governor Gavin Newsom and Lieutenant Governor Xavier Becerra both oppose the measure. They argue that the tax could trigger a flight of wealthy residents to lower-tax jurisdictions. Google co-founder Sergey Brin has coordinated approximately $200 million in opposition funding. This money supports two companion ballot measures, Propositions 41 and 42, which would restrict the scope of the new tax if it passes.

Supporters, including six Nobel Prize-winning economists, argue the tax is a necessary structural change. They contend that the short window between the announcement of the initiative in late November 2025 and the January 1, 2026, deadline prevented many billionaires from moving their residence to escape the levy. The number of billionaires living in California increased by 20 between January and October of this year.

Stanford University economists estimate the tax will raise only $30 billion in net present value. They project that lost income tax revenue from departing residents will cost the state nearly $39 billion. The estimate accounts for assets that may be excluded, such as real estate, and potential legal challenges regarding retroactive taxation. Historical data shows that changes in estate taxes have previously prompted significant migration of the wealthy out of high-tax states.

The vote is scheduled for November 2026. A September poll indicated that Proposition 40 currently falls just short of majority approval. The outcome will determine if California proceeds with the asset levy or relies on existing income tax structures. The result will also signal the state’s willingness to pursue new revenue sources despite opposition from major corporate figures.