Economists Project $139 Billion Gap in California Billionaire Tax Outcome

Two major economic analyses of California’s proposed billionaire tax produce opposing financial outcomes for the state. The gap between their predictions is $139 billion.

Gabriel Zucman, a professor at UC Berkeley and the Paris School of Economics, co-authored a study estimating the tax will generate approximately $100 billion. His team calculated this figure by applying a 5% rate to $2.3 trillion in combined billionaire wealth recorded by mid-2026. They reduced the total by 10% to account for potential avoidance or early residency changes.

Joshua Rauh, a senior fellow at the Hoover Institution at Stanford University, co-authored a competing analysis with Benjamin Jaros. They estimate the tax will cost California $39 billion. Rauh argues that the measure will trigger a large exodus of wealthy residents, reducing the state’s income tax base and eliminating the wealth tax revenue entirely.

Proposition 40, which appears on the ballot in November 2026, imposes a one-time 5% tax on the net worth of individuals who were California residents on January 1, 2026. The legislation targets assets including stocks, real estate, and personal property. Revenue is earmarked for healthcare costs for low-income residents to offset federal Medicaid cuts.

The dispute centers on seven prominent figures who changed their residence before the January 2026 cutoff. Rauh identifies Larry Page, Sergey Brin, Peter Thiel, Don Hankey, Steven Spielberg, Travis Kalanick, and David Sacks as individuals who have left the state. He calculates that their departures alone remove approximately $30 billion from the potential tax base.

Zucman disputes that these individuals have successfully severed their ties to California for tax purposes. He cites legal experts who argue that a change of address does not automatically end state residency. Zucman notes that Brin still commutes to Silicon Valley despite moving to Nevada. Prop 40 was announced in late October 2025, giving residents a two-month window to establish new residency before the tax took effect.

Rauh also highlights legal risks. He argues that billionaires will file constitutional challenges against the tax, particularly regarding its retroactive nature and its reach into assets held outside California. He suggests that a conservative Supreme Court may strike down parts of the measure, further reducing revenue.

Zucman and his co-authors Jasper Boll and Emmanuel Saez note that billionaire wealth in California increased by 144% between 2023 and 2025. They state that the real wealth of the top 0.001% of households has multiplied by 25 since 1982, while average family income in the state has only doubled.

The proposal includes provisions designed to close loopholes seen in previous global wealth taxes. Unlike France’s former tax, which was repealed in 2018, Prop 40 taxes business holdings and shares in companies run by billionaires. It is a one-time, retroactive levy rather than an annual recurring tax.

Supporters of the tax have poured $333 million into a group aimed at defeating the proposition, according to a recent report in The New York Times. The funding comes from super-wealthy individuals who fear the measure will establish a precedent for federal or international wealth taxes.