California billionaires tax could slash revenue by $4.5 billion — every year

California could be on the verge of punching itself in the … pocketbook.

A proposed wealth tax on billionaires would not only drive California’s richest residents out of the state, but it could also result in a loss of state tax revenue up to $4.5 billion annually, according to a new report by the California Tax Foundation.

The proposed ballot initiative for the fall is being led by public employee union SEIU-UHW and it would impose a one-time 5% tax on billionaires to raise up to $100 billion for health care and education. 

However, early signs suggest some of the Golden State’s highest net-worth residents — including Larry Page, Sergey Brin, Peter Thiel and Mark Zuckerberg — have already left or are preparing to jump ship.

The California Tax Foundation’s analysis suggests the long-term consequences could outweigh the short-term gain, warning that “the net present value of these ongoing losses outstrips the one-time revenue projected by the initiative’s proponents.”

“It really does bring up the issue of killing the goose that’s laying the golden eggs,” said David Kline, vice president of communications for the California Taxpayers Association.

A key question is whether billionaire departures will accelerate if voters approve the proposed measure in November. The report points to a growing list of high-profile tech figures who have either left or are “reportedly planning to join the tech billionaire exodus,” highlighting how mobile California’s wealthiest residents can be.

“Billionaires, you can love them or hate them, but the reality is that when they’re in California, they create a lot of jobs and just economic activity around them and around their businesses,” Kline said.

Labor groups backing the proposal argue the tax is necessary to address widening inequality and stabilize funding for public services. Supporters, including SEIU-UHW, have framed the measure as a way to ensure the state’s wealthiest residents contribute more toward schools and healthcare in response to state-funding cuts made by the Trump administration’s “Big Beautiful Bill.”

Debru Carthan, a radiologic technologist and executive vice president of SEIU-UHW, called the California Tax Foundation’s report “deeply flawed” while noting that many billionaires pay far lower tax rates.

“Billionaires have not generally fled California, and studies and examples from other states suggest they won’t,” Carthan said in a statement. “This scare tactic has been studied and repeatedly debunked.” 

She added, “A one-time 5% tax would be minimal to them but could mean the difference between life and death for our patients.”

Gov, Gavin Newsom’s office did not immediately respond to a request for comment on the latest analysis, but the governor has previously expressed skepticism about wealth taxes, warning they can be difficult to enforce and vulnerable to legal challenges. 

“This will be defeated — there’s no question in my mind,” Newsom told the New York Times. “I’ll do what I have to do to protect the state.”

The analysis argues the biggest financial hit would come not from the wealth tax itself, but from losing access to future income taxes. Once billionaires establish residency elsewhere, “they would pay California income tax only on California-source income, which would represent a trivial share of their future income.”

“Depending on how it’s upheld in the courts, you’re losing this steady, ongoing stream that is already being collected now,” Kline said.

Researchers modeled several scenarios and found departures could strip between $978 billion and $1.23 trillion in wealth from California’s tax base. In the most severe case, the state would lose roughly $3.09 billion annually in income tax revenue, along with additional losses tied to reduced spending and economic activity.

The report cites research showing when wealthy business owners leave, “employment in their controlled firms declines 33%,” contributing to reduced investment and slower economic growth.

“That takes opportunities away from everyone — middle class, lower income, just just about everyone in the state,” Kline said. “So, it is not just something that is focused on billionaires. It is a big problem.”

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