California’s proposed billionaire wealth tax, or Proposition 40, could generate an initial windfall but ultimately leave the state billions of dollars poorer, according to a new analysis from Stanford economists.
Benjamin Jaros and Joshua Rauh of Stanford University’s Hoover Institution, in a working paper published in October by the National Bureau of Economic Research (NBER), estimate Proposition 40 would collect roughly $30 billion. Their projection ranges from $28 billion to $36 billion, well below the $100 billion supporters have forecast.
The economists’ analysis estimates billionaire departures have already reduced the potential tax base by nearly 30% or about $540 billion. According to the paper, further departures could cost California between $1 billion and $3.5 billion in annual income-tax revenue. If sustained indefinitely, those losses could exceed the wealth tax proceeds by about $39 billion in present-value terms.
“These findings suggest that the Billionaire Tax Act will not fulfill the primary functions for which it was designed,” Jaros and Rauh wrote.
Zuckerberg Deal Amid Tax Threat
Proposition 40, set for California’s Nov. 3 ballot, would impose a one-time 5% tax on the net worth of billionaires who lived in the state on Jan. 1, 2026, with payments generally due in 2027. Real estate, pensions, and most retirement accounts would be excluded, while taxpayers opting to pay over five years would owe more. The measure would allocate 90% of its proceeds to health care.
Billionaires who have left California include venture capitalist Peter Thiel and the co-founders of Alphabet Inc.‘s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google Larry Page and Sergey Brin.
On Wednesday, Meta Platforms Inc. (NASDAQ:META) CEO Mark Zuckerberg agreed to remain in California or wherever Meta is headquartered for eight years in exchange for non-voting Class C shares he could sell to cover a potential multibillion-dollar tax bill if voters approve the proposed billionaire wealth tax. Forbes estimates his net worth at $239.3 billion. He could sell 20% of the new shares, equivalent to 10% of his total economic interest, to pay for the potential tax liability, while retaining voting control of Meta.
Wealth Tax Debate Intensifies
The potential exodus has been debated for months. In August, billionaire entrepreneur Mark Cuban said the proposal could discourage investment. He said startup founders often become “cash poor, stock rich” as their companies reach billion-dollar valuations, leaving them with limited cash to pay wealth taxes without selling shares or borrowing against them.
In June, economist Peter Schiff warned that taxing unrealized asset values could accelerate capital flight and weaken California’s tax base rather than generate lasting revenue. He argued that taxing accumulated private wealth could undermine the nation’s economic foundation, asking why billionaires would stay to face the levy.
However, SEIU-UHW, the healthcare workers union behind the ballot measure, rejected the Stanford research and told CBS News that the proposal aims to make billionaires pay their fair share to prevent California’s healthcare system from collapsing. Union Vice President Debru Carthan accused opponents of spreading misinformation.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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