Key facts
- California's proposed 5% tax on net worth for billionaires will appear on the November ballot.
- The measure is set to apply retroactively to billionaires residing in California as of January 1, 2026.
- Business leaders and advisors to the ultrawealthy have criticized the tax, citing potential relocation and legal challenges.
- Some ultra-high-net-worth individuals have already moved out of California to preemptively avoid the tax.
- Proponents state the revenue generated will fund healthcare services and offset federal funding cuts.
A proposed 5% wealth tax on California's billionaires is now slated for the November 2026 ballot after a last-minute deal failed to materialize. The measure, which would apply retroactively to residents as of January 1, 2026, has drawn significant criticism and threats of relocation from the state's ultra-wealthy population.
Advisors to billionaires suggest that many of their clients are already bracing for the tax's potential passage and have taken steps to reduce their ties to California. Some have already moved out of the state, citing concerns about the tax and a general feeling of being overtaxed. Lawyers specializing in advising the ultra-rich note that clients often view such one-time taxes as the beginning of a more sustained tax burden.
If passed, the wealth tax is expected to face substantial legal challenges. Arguments may center on its constitutionality, particularly regarding due process and the retroactive application of a net worth tax rather than an income tax. Questions also arise about the logistical complexities of valuing assets, especially those tied up in private companies or stock.
Governor Gavin Newsom, who opposes the current proposal, has instead advocated for a federal wealth tax, which he believes would be more difficult for billionaires to evade. Proponents of the state-level tax argue it is necessary to fund healthcare services and compensate for federal funding cuts. However, some left-leaning opponents have expressed concerns that the measure is not a sustainable long-term solution.