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Every politician eventually runs out of other people’s money to spend. Blue state governors and legislators are just running out faster than the rest.
Right now, there is a coordinated wave of new tax proposals sweeping California, New York, Washington state, Massachusetts, Michigan and Connecticut. The common thread? They all believe the solution to self-inflicted budget crises is to reach deeper into the pockets of their most productive residents. And if those residents decide to leave, they want to charge them an exit tax on the way out. What? Is this America?
Let that sink in. An exit tax. As in, we know you’re leaving because of our lousy tax structure, and we want the door to hit you on the way out.
CALIFORNIA’S HATRED FOR CAPITALISM IS KILLING THE GOOSE THAT LAID ITS GOLDEN EGG
The proposals on the table right now
California’s Billionaire Tax Act is the crown jewel of this movement. The ballot measure would impose a one-time 5% tax on the total net worth of anyone worth more than $1 billion residing in the state. Not their income. Their net worth. Think about what that means for a founder whose entire net worth is locked up in a private company that employs thousands of people. And think about how many millionaires they made themselves building that company. You could have $2 million in liquid assets, and a $100 billion paper valuation and California would hand you a $5 billion tax bill. That’s not a tax policy. That’s an asset seizure dressed up as fairness.
Washington state, which has never had an income tax in its history just passed a 9.9% tax on incomes over $1 million. The moment that bill cleared the legislature, Starbucks founder Howard Schultz announced he was moving to Florida. Shocker. Starbucks’ own headquarters announced it’s moving to Tennessee. Shocker. When the founder and the company both leave at the same time, that’s not a coincidence. That’s a message we hear in a resounding fashion from high tax high spend states.
Michigan wants to amend its state constitution to impose a 9.25% top rate on incomes over $500,000. For residents of Detroit, the combined state and local rate would approach nearly 12%. Meanwhile, across the border in Ohio, the flat income tax rate is 2.75%. In Indiana, it’s 2.95%. You don’t need to be a certified financial planner to do that math. You just need a moving truck.
SEAHAWKS GM WARNS WASHINGTON’S NEW ‘MILLIONAIRE TAX’ COULD HURT FREE AGENT RECRUITING
This is a story about bad leadership decisions
I want to be clear about something. I’m not here to defend billionaires. I’m here to defend economic reality.
The top 1% of California taxpayers currently supplies nearly half of all income tax collections in the state. Half. That’s not a sustainable revenue model. That’s a house of cards. And the moment those top earners which are not just the billionaires, but when the $500,000-a-year business owners, the startup investors, the executives start relocating, the math collapses for everyone else who stays behind.
MAMDANI’S ESTATE TAX PLAN COULD DRIVE WEALTH OUT OF STATE, CRITICS WARN
This has already started. Six of California’s 214 billionaires left before the proposed January 1, 2026, residency cutoff. Those six people alone took $27 billion in potential tax revenue with them. Google co-founder Larry Page dropped $170 million on a Miami estate and moved his family office out of California. David Sacks who lived 30 years in the state packed up for Texas and called the proposed tax what it really is which is an asset seizure.
Here’s what I’ve learned in over thirty years as a financial advisor. Wealthy people don’t wait for the bill to arrive. They plan years in advance. The exits happening today were decided in law offices and financial planning meetings 18 months ago. The exits that haven’t happened yet are being decided right now.
Why this should matter to you even if you’re not a billionaire
WASHINGTON DEMS PASSED AN INCOME TAX THEY KNOW IS UNCONSTITUTIONAL. THAT WAS THE POINT
Here’s where this stops being an abstract policy debate and starts affecting your daily life.
When high earners leave a state, the remaining tax base must pick up the tab. Services get cut. Or taxes get raised on the next rung of earners which are the people making $150,000, then $100,000, then lower. California, New York, and Michigan didn’t build world-class universities, hospitals, and infrastructure by accident. They built them on the backs of a thriving private economy. Dismantle the engine, and eventually the whole train stops.
There’s also a broader economic signal being sent here. When Washington state is no longer a zero-income-tax state, when California makes it financially dangerous to be a successful founder, and when Michigan punishes its highest earners at nearly 12 cents on the dollar innovation, capital, and job creation go somewhere else. And somewhere else, right now, is Florida, Texas, Tennessee, and Nevada.
CALIFORNIA’S LOOMING CAPITAL FLIGHT PROBLEM COULD RESHAPE STATE IN 3 KEY AREAS
What you should do right now
If you live in one of these states and you have built meaningful wealth including a business, a portfolio, a real estate holding, or a qualified retirement account this is not a news story to skim and forget. This is a planning conversation to have with your financial advisor and your estate planning attorney. Several of these proposals include exit taxes on residents who leave within five years of implementation. The window to plan proactively is now. Not after the ballot measure passes. Not after the bill is signed. Now.
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Wealthy people are not a fixed resource. They are mobile, they are organized, and they have options.
And right now, those options are looking a lot like the Sunshine State instead of the Golden State.
