Stanford economists say California billionaire tax could net a $39 billion loss

Proposition 40, appearing on California’s November 3 ballot, would levy a one-time 5 percent tax on the net worth of residents who are billionaires as of Jan. 1, 2026. The tax is slated for collection in 2027, with higher rates for those who spread payments over five years, while real estate, pensions and most retirement accounts would be largely excluded.

Stanford-affiliated economists Benjamin Jaros and Joshua Rauh, in a working paper released by the National Bureau of Economic Research, project the measure would generate roughly $30 billion, a range of $28 billion to $36 billion, far below the $100 billion cited by supporters. They attribute the shortfall to billionaire relocations, noting that public moves by seven high-profile individuals – including Peter Thiel and Google co-founders Larry Page and Sergey Brin – would eliminate about 30 percent of the anticipated tax base.

The researchers warn that the loss of these residents could reduce California’s income-tax receipts by $1 billion to $3.5 billion annually. In simulations, 85 percent of scenarios produced a net loss for the state that would exceed the one-time revenue by $38.9 billion in today’s dollars.

Supporters of the measure, represented by the SEIU–United Healthcare Workers West, argue the tax is needed to shore up the state’s health-care system. Other economists, including Jasper Boll, Emmanuel Saez and Gabriel Zucman, contend that even if all billionaires left, it would take about 25 years for cumulative income-tax losses to equal the proposed windfall. They also criticize the Stanford analysis for treating the wealth tax as a one-off while assuming migration effects are permanent.

California’s Legislative Analyst’s Office projects the tax could raise “tens of billions” over several years while trimming annual income-tax revenue by less than $1 billion.

The proposal has sparked a costly political fight, with tech billionaires contributing more than $340 million to oppose it. Sergey Brin alone has donated over $100 million. Governor Gavin Newsom opposes Proposition 40 and backs Proposition 42, a competing measure that would block retroactive wealth taxes. A poll by the Citrin Center and Politico found 46 percent of likely voters support Proposition 40, compared with 43 percent opposed.

Nvidia CEO Jensen Huang, who remains a California resident, said he would be willing to pay an estimated $8 billion over five years, describing the ability as a privilege and urging others to stay in the state. Voters will decide on the measure on Nov. 3, and even if it passes, competing propositions could prevent its implementation.