California’s billionaire tax may depart the state $39 billion poorer, Stanford economists warn
Supporters of California’s proposed billionaire tax say it may elevate $100 billion, with 90% of the proceeds earmarked for well being care. A pair of Stanford economists warn it may as an alternative depart the state $39 billion worse off in as we speak’s {dollars}.
Proposition 40, on California’s Nov. 3 poll, would impose a one-time 5% tax on the web value of the state’s few hundred billionaires who have been residents on Jan. 1, 2026. The tax can be due in 2027, and those that select to unfold funds over 5 years would pay extra. Real property, pensions, and most retirement accounts would usually be excluded.
Benjamin Jaros and Joshua Rauh, economists affiliated with Stanford University’s Hoover Institution, see a a lot smaller payday. In a working paper printed this month by the National Bureau of Economic Research (NBER), they estimate the tax would gather about $30 billion, in a spread of $28 billion to $36 billion. That is lower than a 3rd of what proponents anticipate.
Their major clarification is straightforward: Billionaires can transfer.
The researchers used Forbes billionaire rankings, actual property stories, and public relocation bulletins. From these, they estimate that billionaire departures have already eradicated practically 30% of the proposed tax base. Seven billionaires who’ve publicly moved out of California account for roughly $540 billion in wealth, CBS News reported, citing the research. They embody Peter Thiel and Google cofounders Larry Page and Sergey Brin. The estimate additionally reductions what stays of the bottom for the chance that courts strike the tax down.
The new determine is a sharper downgrade than the authors’ earlier Hoover analysis. That evaluation projected about $40 billion in turnover and a $25 billion internet loss for the state.
Why the Stanford economists see a $39 billion gap
Still, $30 billion is hardly pocket change. The researchers’ greater concern is what occurs after the state collects it.
They estimate that billionaire departures may price California $1 billion to $3.5 billion a 12 months in misplaced earnings tax turnover. If these losses proceed indefinitely, the long run shortfall would outweigh the one-time wealth tax proceeds by $38.9 billion in as we speak’s {dollars}. The researchers ran 100,000 simulations utilizing completely different turnover and discount-rate assumptions, and 85% produced a internet loss for the state.
Those losses are projections, not cash California has already forfeited. And asserting a transfer isn’t the identical factor as escaping the tax. The tax relies on residency as of Jan. 1, 2026, so a public relocation announcement alone doesn’t set up whether or not somebody would owe it. Economists who helped design the measure argue that some high-profile “leavers,” together with Brin, possible remained California tax residents on that date due to their ongoing ties to the state.
The union sponsoring the measure, SEIU–United Healthcare Workers West, disputed the analysis. It informed CBS News the proposition is supposed to forestall the collapse of California’s well being care system.
Other economists say the losses received’t final
As Fortune reported in May, a separate NBER research by economists Jasper Boll, Emmanuel Saez, and Gabriel Zucman reached a distinct conclusion. Even in an excessive state of affairs the place each billionaire completely left the state, it could take roughly 25 years for collected earnings tax losses to match the proposed $100 billion windfall. Saez offered unpaid recommendation on the poll measure’s design.
In an August revision, the authors raised their estimate of what California billionaires paid in state earnings taxes in 2025 from $4.1 billion to $4.3 billion. The revision additionally challenges the Stanford method straight. The authors argue it’s inconsistent to deal with the wealth tax as one-time whereas treating the migration it triggers as everlasting. If California doesn’t introduce additional wealth taxes, they argue, some billionaires may ultimately return, and newly created fortunes may assist replenish the state’s billionaire tax base.
California’s nonpartisan Legislative Analyst’s Office provides a 3rd view. It expects the tax to generate tens of billions of {dollars} over a number of years whereas probably lowering annual earnings tax turnover by lower than $1 billion.
The debate comes as America’s wealth hole continues to widen. The richest 1% of U.S. households held a document 32.5% of the nation’s complete internet value within the second quarter of 2026, up from 31.1% a 12 months earlier, in accordance with Federal Reserve data. The backside half of households, in the meantime, held simply 2.3%, down from 2.4% a 12 months earlier.
A $340 million struggle, and a governor on the opposite facet
The proposed tax has already sparked an costly political battle. Tech billionaires have raised greater than $340 million to oppose the measure and help associated poll initiatives, in accordance with the Guardian, which reviewed marketing campaign finance disclosures. Brin, the biggest donor, has given more than $100 million. Other donors embody former Google CEO Eric Schmidt, Palantir cofounder Peter Thiel, Stripe CEO Patrick Collison, and DoorDash CEO Tony Xu.
The opposition marketing campaign spent a minimum of $21.2 million within the first 19 days of September alone.
California Gov. Gavin Newsom additionally opposes the tax, arguing it may drive rich residents and their earnings tax funds out of the state. On Oct. 9, he endorsed Proposition 42, a Brin-funded competing measure. Prop 42 would bar retroactive taxes and ban new state taxes on private property, successfully blocking Prop 40. Newsom has as an alternative proposed a nationwide minimal tax on Americans value greater than $100 million.
Prop 42 and a second countermeasure, Proposition 41, may every nullify the billionaire tax if both receives extra sure votes than Prop 40. Voters seem cut up on the tax itself: A latest Citrin Center–Politico ballot discovered 46% of possible voters in favor and 43% opposed.
Not each billionaire is heading for the exit
Nvidia CEO Jensen Huang, a longtime California resident, stated he can be comfy paying an estimated $8 billion in taxes over 5 years. He referred to as that capacity a privilege, as Fortune reported Tuesday. Huang has additionally urged people to move to California slightly than depart.
Voters will determine whether or not to impose the tax on Nov. 3. Even if it passes, competing measures may maintain it from taking impact, and it may take years to find out whether or not it finally leaves California higher or worse off.
