California billionaires tax: why millionaire Emil Barr canceled his move to San Francisco

He changed his mind after taking a closer look at California’s regulatory and tax environment, including its proposed billionaire wealth tax, which persuaded him to reverse the move altogether. He would not owe that tax under the current proposal, but fears it could open the door to taxes on millionaires like him.

“I think it was less about immediate finances,” Barr said. Fortune. Instead, he highlighted what he described as California’s “anti-business” political rhetoric.

His decision raises the question that divides California: Would taxing its richest people help pay for essential services, or make the state a less attractive place to start a business? Barr sees it as a warning sign, but his supporters see it as a way to protect health care without sacrificing the talent and investment that attracts businesses to this country. The debate also has national issues. States invest in public services that help businesses grow, but may lose the opportunity to tax some of that wealth when residents move out before cashing out.

The flight of billionaires attracts attention, but wealth can disappear more quietly. Founders like Barr can choose where to build before their fortunes are big enough to be taxed, and residents who already own them can move before cashing out. States invest in public services that help businesses grow, but may lose the ability to tax that wealth as it moves. The debate also has national issues.

Proposition 40, on the Nov. 3 ballot, would impose a one-time 5% tax on eligible billionaires who resided in California as of Jan. 1, 2026. It would tax accumulated wealth rather than annual income, with most of the revenue going toward health care.

The measure received support from six Nobel Prize-winning economists, including Joseph Stiglitz, Paul Krugman and Daron Acemoglu. In a September letter, they argued that the tax would be modest compared to billionaires’ wealth gains and would help replace the loss of federal health care funding while supporting public services important to California’s economic growth.

A tax for a billionaire, the cold feet of a millionaire

Flashpass develops technology that helps government agencies connect people to work, including people displaced by AI, Barr said. He moved to Columbus because Ohio was the first state to use his software.

San Francisco initially chose Barr as the ideal location because it is closer to investors and AI companies. He hadn’t decided whether to move Flashpass’s headquarters there, but was considering moving himself, until California’s regulatory and tax climate made him change his mind.

“I’m not 100 percent sure I’ll stay in Ohio and continue to grow my business in Ohio,” Barr said. “But I’m 100 percent sure I wouldn’t start a business in California.”

He says political hostility toward entrepreneurs could also discourage them from starting businesses beyond California. “If we continue to vilify entrepreneurs, entrepreneurs are not just going to leave California; they’re going to leave America,” Barr said.

His decision, however, did not completely end his company’s ties to California. He says Flashpass still has employees and investors there, and continues to travel to the state. He also leaves open the possibility of raising taxes, although he says the approach is important.

“The solution may be to pay higher taxes and update the tax code, but it needs to be done in a more nuanced and incremental way,” he said, without offering a specific alternative.

Barr is not alone in his opposition. Gov. Gavin Newsom opposes the measure, and Google co-founder Sergey Brin helped fund the opposition.

Why advocates challenge the investment threat

Not all billionaires see this proposal as a reason to reconsider California as a whole. In a January Bloomberg podcast, Nvidia CEO Jensen Huang said he was “completely on board” with the proposed tax, pointing to Silicon Valley’s talent pool as the reason the company is working there.

Debru Carthan, vice president of SEIU-United Healthcare Workers West, the union that supports the measure, dismissed concerns that the proposal would drive away wealthy residents or investment. The campaign says the tax would help replace about $100 billion in federal health care funding that California would lose over five years.

“This scare tactic simply does not stand up to scrutiny,” she said in a statement to Fortune. “There’s more money and investors coming to California now, not less.”

Carthan cited the example of Massachusetts and Washington, saying their taxes on wealthy residents raised billions for public services while their high-income populations continued to grow. These policies differ from California’s proposed one-time wealth tax, but the union presents them as evidence against predictions of an exodus.

She argued that the most immediate threat is the loss of federal health care funding.

“This is the real crisis facing our state,” she said, warning that without additional funding, clinics would close, hospitals would lay off workers and Californians could lose coverage or have to pay higher premiums.

The measure would spend 90% of its revenue on health care. The nonpartisan Legislative Analyst’s Office estimates it would raise tens of billions of dollars over several years. He also expects that taxpayer responses, including some departures, could reduce current tax revenues by less than $1 billion a year.

What migration research can – and cannot – tell us

Cornell sociologist Cristobal Young, who has spent nearly two decades studying the impact of taxes on high-income migration, says fears of wealthy people fleeing higher taxes are often exaggerated.

“The more money you make, the less likely you are to move,” Young said. Fortune.

Successful high earners tend to live where they built their careers, with business partners, professional networks and family ties that make moving expensive.

“All of a sudden you’re in a new professional environment, and now you’re more of an outsider,” he said.

Young also said people’s objections to a state’s taxes don’t always explain where they actually live or start a business. Their existing roots, business partners and customers may matter more.

He began studying tax migration using New Jersey tax returns after the income tax on high earners was increased in 2004. Even with low-tax Pennsylvania nearby, he said, the study did not reveal the initial pattern that critics feared. A 2016 study he co-authored, examining 45 million tax records over 13 years, also found limited tax leakage by millionaires.

But Young said those results don’t necessarily predict what would happen in California. A large tax on accumulated wealth is different from adding a few percentage points to the annual income tax.

“We have never passed a tax like this before in the United States,” he said.

He added that the distribution of high-income taxes across states is also important, because as more states adopt them, it becomes less easy to avoid them.

“As more and more neighbors pass taxes for millionaires, you know, where are you going to go? he said. “Well, you can always go to Texas, but those are long distance moves.”

Young doubts a billionaire wealth tax would spread so widely because most states don’t have California’s concentration of billionaires. That could provide more incentive to move, he argued.

Tax experts have proposed another way to handle interstate movements. In a California Law Review article, Brian Galle, David Gamage and Darien Shanske argue that people can accumulate gains on their investments in one state, then move before selling their assets and triggering a tax bill. They propose taxing gains as they accrue to reduce this avoidance.

Young believes the tax system’s unequal treatment of wages and investment gains is a real problem. Workers pay taxes as they earn their wages, he said, while investors can defer tax on the rise in stock value until they sell. He wonders if a one-time levy could solve this problem.

“It’s an ongoing problem. It’s an eternal problem,” he said. “We need a permanent solution.”