California's proposed wealth tax on billionaires may not deliver the windfall its supporters promise—and could actually reduce state revenue over the long term, according to a new working paper from two Stanford University economists. The study, published by the National Bureau of Economic Research, lands just two weeks before voters decide on Proposition 40 in the November 3 election.
Economists Benjamin Jaros and Joshua Rauh estimate that the measure, which would impose a one-time 5% levy on the net worth of California residents with $1 billion or more, would generate roughly $30 billion. That is less than a third of the $100 billion projected by backers, who include the Service Employees International Union-United Healthcare Workers West, the initiative's sponsor.
The shortfall stems largely from the shrinking pool of taxable billionaires. Seven billionaires have publicly left the state, including Peter Thiel and Google co-founders Larry Page and Sergey Brin. Together, they took approximately $540 billion—about 30% of California's billionaire wealth—out of the state's reach. The authors suspect many more have departed quietly, eroding the tax base before the measure even takes effect.
The paper projects that a reduced billionaire population could cost California between $1 billion and $3.5 billion annually in income tax collections. If those losses persist, their present value would exceed the wealth tax proceeds by about $39 billion. "These findings suggest that the Billionaire Tax Act will not fulfill the primary functions for which it was designed," Jaros and Rauh wrote, adding that "behavioral response prior to voting has eroded most of the projected tax base."
For advisors serving ultra-high-net-worth families, the measure's look-back provision is a critical planning issue. The tax applies to anyone who was a California resident on January 1, 2026, so relocating now may not shield clients from liability. The Franchise Tax Board would also scrutinize whether a departure was genuine, making residency planning more complex than simply changing one's address.
California's nonpartisan Legislative Analyst's Office has offered a more moderate assessment, expecting a temporary gain of tens of billions of dollars, partly offset by an ongoing decline of less than $1 billion per year in income tax receipts. That view aligns with the Stanford findings, though the magnitude of the long-term drag remains uncertain.
Supporters have pushed back against the research. Debru Carthan, vice president of SEIU-United Healthcare Workers West, dismissed the study in a statement to CBS News, saying the proposition's "sole purpose is to ensure that billionaires finally pay their fair share to prevent a collapse of California's healthcare system." Rep. Ro Khanna, a Democrat representing California's 17th congressional district, has also defended the measure, insisting in a Guardian op-ed that it would raise about $100 billion, with 90% going to healthcare spending to help keep 3 million Californians from losing coverage. He called Proposition 40 "the most important ballot initiative in America."
Public opinion, however, appears divided. "Californians do think billionaires should pay more," said Cohen, founder and CEO of polling firm TrueDot, told Politico, "but it doesn't translate so easily into them voting for this tax." The uncertainty underscores the challenge for advisors: even if the measure passes, its fiscal impact—and the planning implications for wealthy clients—remain highly uncertain. For those advising families on estate planning and family communication, the potential for wealth flight adds another layer of complexity. Meanwhile, the broader trend of nonbanks gaining share in financial services may offer alternative strategies for clients seeking to protect assets.
