California’s Wealth Tax Vote Will Test Whether a Single State Can Tax Mobile Fortunes

A survey of tax scholars has found that about 70 percent would vote against Proposition 40, California’s proposed one-time 5 percent tax on the net worth of billionaires. Of 105 respondents, 73 said they would oppose the measure and 32 would support it. The survey was conducted by Jeff Hoopes, a professor at the University of North Carolina and research director of its Tax Center. He sent it to members of the National Tax Association, a professional body made up largely of academic economists, accountants and lawyers.

The results arrive days before voters decide on the measure on November 3, and they complicate an already contested debate. In September, six Nobel Prize-winning economists, including Paul Krugman and Joseph Stiglitz, endorsed the tax, and recent polls have shown voters closely divided. For executives, investors and policymakers, the dispute matters beyond California. The measure would be the most ambitious attempt by any US state to tax accumulated wealth. Its outcome will influence whether other states, and potentially other countries, try similar approaches.

California Proposition 40: What the Billionaire Tax Would Do

Proposition 40 would impose a one-time tax of 5 percent on the net worth of individuals worth more than $1 billion who were California residents on January 1, 2026. Covered assets include business interests, securities, art, collectibles and intellectual property. Real estate and certain retirement accounts are excluded. The tax would be paid over several years. Ninety percent of the revenue would go to state health care programs, including Medi-Cal, and 10 percent to food assistance and education.

The measure is sponsored by SEIU-UHW, a health care workers’ union. Its principal drafters include the tax-law professors Brian Galle, David Gamage and Darien Shanske, as well as the economist Emmanuel Saez. Supporters estimate it could raise about $100 billion. The state’s nonpartisan Legislative Analyst’s Office is more cautious. It projects a temporary revenue gain of up to tens of billions of dollars over several years. It also projects a possible ongoing loss of less than $1 billion a year in income tax if billionaires leave.

What the Survey Shows, and What It Does Not

The professional breakdown is revealing. Accountants were the most opposed, with 17 of 20 voting against. Economists opposed it by 49 to 20. Lawyers were the only group in which a majority, 9 of 15, supported the measure.

Respondents opposing the tax raised three main objections. Several who support a federal wealth tax doubted that a single state could enforce one, because both billionaires and their assets are mobile. Others doubted that a “one-time” tax would remain one-time. Many warned that valuing private companies and illiquid assets would lead to costly disputes.

“I think there is a real chance that we see some billionaires change where they claim residency based on this tax,” said Hoopes. “It would not take very many of the very richest ones moving to make a large dent in the expected tax revenue.”

Supporters among respondents made different arguments. Taxing accumulated wealth is economically efficient, because it does not discourage future work or investment as much as taxes on income do. Reducing the concentration of wealth has value in itself. And the revenue would help offset federal cuts to Medicaid.

The survey’s limitations should be stated plainly. It had 105 respondents, who chose to answer and may not represent the profession as a whole. The National Tax Association did not sponsor or endorse it. Hoopes, who designed it, sits on the advisory council of the Tax Foundation, a think tank generally skeptical of wealth taxes. He said he undertook it in response to the Nobel laureates’ endorsement. The findings are informative about expert opinion, but they are not a definitive measure of it.

Three Tests for a State Wealth Tax

The debate can be clarified by separating three questions that any subnational wealth tax must answer.

The mobility test. Can the state keep the tax base in place? California’s January 1, 2026 residency date was designed to prevent billionaires from avoiding the tax by moving after the measure passed. Several prominent billionaires are nonetheless reported to have left the state before the deadline. They include Larry Page and Sergey Brin, Google’s cofounders, as well as Peter Thiel, Travis Kalanick and Larry Ellison. California tax authorities may challenge some of those departures, and residency audits are likely. The bigger concern is longer term. If the wealthiest residents leave permanently, California loses not only the wealth tax but also future income taxes. A Hoover Institution working paper estimates a possible net loss of almost $25 billion.

The valuation test. Can the state measure what it is taxing? Publicly traded shares are straightforward to value. Private companies, venture holdings, art and intellectual property are not. Disputes over valuation could be prolonged and expensive, and outcomes may depend more on litigation than on the statute.

The credibility test. Will taxpayers believe the tax is genuinely one-time? Supporters present it as a single levy to address a fiscal shortfall. Opponents argue that once a state has taxed wealth once, it will be tempted to do so again. If wealthy individuals believe the tax could recur, they have stronger incentives to leave and to structure their affairs to avoid it.

Supporters argue that the residency date, the scale of the revenue and the design of the measure address these concerns adequately. Critics argue that the departures before the deadline show the mobility test has already been partly failed. The evidence so far is incomplete. The real effects would emerge only over several years.

The Political Battle

The measure has divided California’s political establishment. Governor Gavin Newsom opposes it and rejected a proposed 2 percent compromise. The California Chamber of Commerce and several health care organizations also oppose it. Supporters include Senator Bernie Sanders, the California Democratic Party and the California Nurses Association.

Opponents have also qualified two competing measures. Proposition 41 would prevent new taxes from circumventing education-spending requirements. Proposition 42 would amend the state constitution to prohibit retroactive taxation, a change opponents say would invalidate the billionaire tax. The opposition campaign, Building a Better California, had raised $118 million by August, more than $100 million of it from Brin.

Polling suggests a close result. A Public Policy Institute of California survey in September found 52 percent of likely voters in favor of Proposition 40. Other September polls showed narrower margins. Majorities in the PPIC survey also supported the competing measures, raising the prospect of conflicting results and possible litigation.

Why This Matters for Business Leaders

For founders, investors and executives with significant equity holdings, the vote is a test of a new form of state taxation. If Proposition 40 passes, other high-tax states may consider similar measures. Wealth planning will increasingly need to account for residency timing, the composition of assets and the risk of retroactive taxation. If it fails, the arguments over mobility and valuation will shape future proposals at the federal level.

For companies, the outcome may affect where founders and senior executives choose to live and where some companies place their headquarters. It is also likely to influence the wider debate over taxing unrealized gains, which has been gaining ground internationally.

Executive Takeaways

What changed: A survey of tax scholars has found about 70 percent oppose California’s proposed one-time 5 percent billionaire tax. The vote takes place on November 3, and polls show the electorate closely divided.

Why it matters: The measure would be the largest attempt by a US state to tax wealth. Its effects on revenue, residency and valuation will set a precedent well beyond California.

What leaders should do next: Individuals with significant California exposure should review residency status and asset structure with advisers. Companies should monitor the outcome and any litigation over competing measures.

Whatever the result, the debate over Proposition 40 has clarified the central problem of taxing wealth at the state level. A state can define its tax base. It cannot prevent that base from moving. Over the next 12 to 24 months, the indicators to watch are the vote itself, legal challenges, residency audits of departed billionaires, actual revenue collections against estimates, and whether other states follow California’s lead. The answer to whether a single state can tax mobile wealth will come not from surveys or endorsements, but from what billionaires and courts do next.

Have you read?
Peter Thiel Criticizes Apple’s Innovation Record After Steve Jobs.
Everton Takeover: Friedkin Group Explores Sale Amid US Investor Interest.
Ken Griffin’s Citadel Builds $900 Million AbbVie Investment.
Bill Ackman Urges Netanyahu to Remove Far-Right Ministers.
Why Singapore and Ireland Are Reshaping Global Wealth Geography.

Follow CEOWORLD Magazine on: Google News, LinkedIn, X (Twitter), and Facebook.

Note: The views expressed are those of the authors and do not necessarily reflect those of CEOWORLD Magazine, its Editorial Board, or management. Content is provided "as is," may contain monetized links, and is not professional advice. See our Ethics & Guidelines for details. Reproduction requires prior written permission.

Contact info@ceoworld.biz for inquiries or media requests.