California's $100B Billionaire Tax Could Lose Money, Hoover Economists Warn

California voters decide Proposition 40 on Tuesday, a one-time 5% tax on individuals and trusts holding more than $1 billion in assets. Two Hoover Institution economists say the billionaires have already voted with their feet, and that the state could come out behind even if the measure passes.

Joshua Rauh and Benjamin Jaros found that announced departures have cut the tax base by about 30%. Assuming 10% avoidance, they estimate collections of $28 billion to $36 billion, well short of the roughly $100 billion supporters promise. They calculate a negative net present value of $38.9 billion, a loss in about 85% of simulated outcomes.

"Behavioral response prior to voting has eroded most of the projected tax base," they wrote. Their conclusion: lost income tax revenue would roughly offset, and in most scenarios more than offset, the one-time haul. Billionaires pay an estimated $3.3 billion to $5.8 billion in California income tax every year.

Supporters see it differently. They cite about $2.3 trillion in billionaire wealth held in mid-2026, and a working paper by UC Berkeley's Gabriel Zucman and Emmanuel Saez, with Jasper Boll of the Paris School of Economics, that also estimates about $100 billion over five years with only minor income tax losses.

The measure would apply to businesses, securities, art, collectibles and intellectual property, while exempting real property, pensions and certain retirement accounts. It would reach retroactively to anyone who was a California resident on Jan. 1, 2026, with payment spread over five years. Revenue is earmarked for health care, public education and food assistance.

Fox Business reports that Google co-founders Larry Page and Sergey Brin, Oracle's Larry Ellison and PayPal co-founder Peter Thiel have moved out of the state or relocated businesses. Affirm co-founder Max Levchin told Bloomberg he would "probably" leave if it passes: "I love California. I think it's beautiful."

Democratic Gov. Gavin Newsom opposes the proposal over concerns that billionaires will leave. And although it is billed as one-time, the Legislature could amend it by a two-thirds vote, without going back to voters, opening the door to future wealth taxes.