The tax, which will be on the ballot in November, would charge around 200 California billionaires a one-time 5% levy on their total wealth, with proponents targeting additional revenues worth $100 billion spread out over five years. Most of this revenue would go toward offsetting projected losses in health care funding worth tens of billions of dollars due to federal cuts.

But the criticisms directed at the tax are likely to fall on deaf ears when it comes to the accountants behind it. Even if every single one of California’s wealthiest residents decided to call time on the Golden State, it would take years to vindicate their protests, and the state would likely still come out ahead—for a while at least.

Last year, billionaires residing in California paid a grand total $4.1 billion in income tax, or around 0.2% of their collective net worth of over $2 trillion, according to a working paper published Monday by researchers at the National Bureau of Economic Research (NBER). That means that even under an extreme scenario in which every billionaire permanently severed ties with the state overnight, it would take 25 years for the lost income tax revenue to equal the $100 billion windfall California would receive from the wealth tax over five years.

Only six prominent billionaires publicly announced to have left the state before Jan. 1st of this year, the proposed tax’s deadline to change residency, including Florida-bound venture capitalist Peter Thiel as well as Google cofounders Larry Page and Sergey Brin. Other notable names to depart were lending magnate Don Hankey, who moved to Nevada, former Uber CEO Travis Kalanick, now a Texas resident, and Hollywood director Steven Spielberg, who has called New York City home since January.

More ultra-wealthy have said they have moved out of California since the cutoff date, including Meta CEO Mark Zuckerberg and David Sacks, the venture capitalist and President Donald Trump’s former technology advisor.

While these individuals are taking significant wealth with them, it’s been far from a mass exodus, which bodes well for the state’s coffers in the near term should the proposal pass. The NBER paper calculated that if only one-quarter of California’s billionaires departed the state, it would take a century for lost tax revenues to match the one-time wealth tax’s $100 billion injection.

Paying for the privilege

For those billionaires who moved after the cutoff date or decided to stay (such as Nvidia CEO Jensen Huang), the tax implications are likely to be noticeable but marginal compared to the wealth they have accrued over the years.

Because the proposed levy would be spread out, the authors considered the tax as an annual 1% payment for five years. This would represent an annual state income tax obligation 25 times larger than what billionaires had grown accustomed to. (Although since 2019, California’s four richest people have only paid an average 0.07% of their wealth toward state income tax).

“The proposed one-off California billionaire tax of 5%, payable over 5 years, is both small relative to California billionaires’ wealth gains and large relative to the taxes they currently pay,” the authors wrote.

Billionaire wealth in California ballooned 30-fold over the past 40 years, according to NBER, while total household wealth has only doubled. And though residents have paid more taxes in nominal dollar amounts, the tax burden itself has failed to keep up. Since 2019, billionaires have paid, on average, 1.3% in state, federal, and corporate taxes as a percentage of their total wealth. For all California residents, meanwhile, income tax payments have amounted to 4.4% of all household income over the same period.

“California GDP per family looks almost like a flat line relative to the extraordinary growth of the billionaire class,” the researchers wrote. “This vividly illustrates the failure of the California individual income tax to tax the very wealthiest people in the state.”

One reason for the discrepancy is that more than 80% of billionaire wealth in California is locked up in unrealized gains, and therefore untaxed. Billionaires have long employed this strategy to avoid paying income tax—sometimes taking symbolic salaries or none at all—but using their enormous asset holdings as collateral to secure favorable loans that finance their lifestyle, avoiding selling any stock that would be considered taxable. 

A 2021 ProPublica investigation found that between 2014 and 2018, the country’s 25 richest people saw their net worths rise a collective $401 billion, although they paid $13.6 billion in federal income tax, a rate of only 3.4%. The average federal income tax rate, meanwhile, stands at 14.5%, according to the Tax Foundation. 

Palatable losses

Reactions to the proposed wealth tax have been polarized. 

For every lawmaker and businessperson backing it, dissidents have emerged, even among Democratic Party bigwigs such as California Gov. Gavin Newsom, who has warned the measure could dent the state’s competitiveness and appeal to high-income earners. 

He may have a point, as more billionaires could opt to leave should the tax pass in November, according to conservative commentators including Mike Solana of Peter Thiel’s Founders Fund. And even though the cutoff date has passed, legal experts say court challenges are likely to follow should voters approve the new tax, particularly for individuals like Zuckerberg who moved during 2026. 

Other analyses have come to the opposite conclusion as the NBER paper. The libertarian-leaning Hoover Institute reported in March the wealth tax’s projected gain would be closer to $40 billion, and could turn negative when accounting for wealthy Californians leaving the state in the years to come. Even backers of more progressive taxes have warned a one-time wealth tax would do little to address how the ultra-wealthy are able to skirt income tax by borrowing against their assets, recommending instead a more comprehensive structure to tax capital gains.

The long-term ramifications of the tax depend on whether it passes, of course, and on how many billionaires choose to leave the state in the coming months. The signs so far are positive for proponents of the tax, as despite high-profile departure announcements, the number of billionaires residing in California has risen slightly this year, from 239 in January to 253 earlier this month, according to NBER. Backers might have to hope the paper is right about other things too, and that California can stomach losing some high-profile residents—even very rich ones.