Economists Clash Over California Billionaire Tax Revenue Estimates

Economists disagree on whether California’s proposed billionaire wealth tax will generate tens of billions in revenue or drain the state’s coffers. California voters will decide on Proposition 40 on November 3, 2026. The measure imposes a one-time 5% tax on the net worth of residents who held billionaire status on January 1, 2026.

Gabriel Zucman of UC Berkeley and the Paris School of Economics estimates the tax will raise approximately $100 billion. He co-authored an analysis with Jasper Boll and Emmanuel Saez that values California billionaire wealth at $2.3 trillion as of mid-2026. The researchers calculated this figure by applying the 5% rate and reducing the total by 10% to account for potential avoidance and evasion.

Joshua Rauh of Stanford University and the Hoover Institution argues the tax will cost the state $39 billion. Rauh co-authored a competing study with Benjamin Jaros. He claims the tax will trigger an exodus of wealthy residents, which will reduce income tax revenue more than the new wealth tax will add. Rauh estimates that at least seven billionaires moved out of California before the January 1, 2026, cutoff.

Rauh identifies Larry Page, Sergey Brin, Peter Thiel, Don Hankey, Steven Spielberg, Travis Kalanick, and David Sacks as those who left the state. He says these departures removed around $30 billion in potential revenue from the tax base. Zucman disputes that these individuals successfully ended their California residency. He notes that Brin, for example, still commutes to Silicon Valley despite moving to Nevada. Zucman argues that establishing residency requires more than a change of address.

The proposal applies retroactively to residents on January 1, 2026. This provision aims to prevent last-minute moves to other states. The revenue is earmarked primarily for the health care of low-income Californians to offset federal Medicaid cuts. Critics point to the legal risks of retroactive taxation and the difficulty of valuing private assets such as venture capital holdings.

Past wealth taxes have faced challenges with loopholes and resident flight. France eliminated its wealth tax in 2018 after critics argued it drove tens of thousands of millionaires to leave the country. Zucman cites a recent study of Norway, which has had a wealth tax since 1892, suggesting that recent tax increases drove at most 100 wealthy individuals to leave without significantly reducing revenue. The debate over Proposition 40 centers on whether California’s specific design will avoid these historical pitfalls.