California Eyeing Billionaire Tax

Pursuant to Elections Code Section 9005, we have reviewed the proposed initiative that would create a new tax on the wealth of billionaires (A.G. File No. 25-0024, Amendment #1).

One-Time Wealth Tax on Billionaires. Billionaires living in California on January 1, 2026 would have to pay a one-time state tax equal to 5 percent of their net worth. The tax would be due in 2027. Taxpayers would have the option to spread the payments over five years, but would have to pay more to do so. Real estate, pensions, and retirement accounts would be excluded from the tax.

Most of the Money Set Aside for Health Care. Revenues from the wealth tax would be set aside in a special account. The state would decide how and when to spend the money but it would have to be spent on certain types of services. In particular, 90 percent of the money would have to be spent on health care services for the public. The rest would have to be spent on administration of the wealth tax, education, and food assistance. Other state laws that require some tax revenue to be used in certain ways, like spending on schools and building the state’s rainy day savings, would not apply to this money.

Temporary Increase in State Revenues. The measure would create a temporary increase in state revenues likely amounting to tens of billions of dollars spread over several years beginning in 2027. The exact amount is uncertain and would depend on the number of billionaires in the state, their wealth levels, and their responses to the tax.

Likely Ongoing Decrease in State Income Tax Revenues. It is likely that some billionaires decide to leave California in response to the tax. This would reduce state income tax collections (and to a lesser extent sales tax collections) by hundreds of millions of dollars or more per year on an ongoing basis. This reduction would affect the state’s general purpose revenues used to fund schools, health care, prisons, and other services.

State Costs to Administer the Tax. The state would incur costs of tens of millions of dollars per year to administer the tax. These costs would be paid from the new revenues.

Major Fiscal Effects

Temporary revenue increase from the wealth tax likely amounting to tens of billions of dollars over multiple years. Likely persistent reduction in income tax collections exceeding hundreds of millions of dollars per year.