California’s billionaire tax could make the state $39 billion poorer, Stanford economists warn.
Supporters of California’s proposed billionaire tax say it could raise $100 billion, 90 percent of which would go to health care. Two Stanford economists warn that could leave the state worse off than $39 billion in today’s dollars.
Proposition 40, passed on November 3 in California, would impose a one-time 5% tax on the net worth of the state’s several hundred billionaires who were residents as of January 1, 2026. The tax would be due in 2027, and those who choose to spread their payments over five years would pay more. Real estate, pensions and most retirement accounts would generally be excluded.
Benjamin Jaros and Joshua Rauh, economists affiliated with the Hoover Institution at Stanford University, predict a much lower wage. In a working paper released this month by the National Bureau of Economic Research (NBER), they estimate that the tax would raise about $30 billion, with a range of $28 billion to $36 billion. That’s less than a third of what the project’s supporters expect.
Their main explanation is simple: billionaires can move.
The researchers used Forbes billionaire rankings, real estate reports and public moving announcements. Of these, they estimate that billionaire departures have already eliminated nearly 30% of the proposed tax base. Seven billionaires who publicly left California represent a wealth of about $540 billion, CBS News reported, citing the study. They include Peter Thiel and Google co-founders Larry Page and Sergey Brin. The estimate also does not take into account what remains of the base for the risk that the courts overturn the tax.
The new figure represents a more pronounced downgrade than the authors’ previous Hoover analysis. That analysis projected about $40 billion in revenue and a net loss of $25 billion for the state.
Why Stanford Economists See a $39 Billion Hole
Still, $30 billion is hardly pocket change. Researchers’ biggest concern is what happens after the state collects them.
They estimate that the departure of billionaires could cost California between $1 billion and $3.5 billion a year in lost tax revenue. If these losses continue indefinitely, the future deficit would exceed the one-time wealth tax proceeds of $38.9 billion in today’s dollars. The researchers ran 100,000 simulations using different revenue and discount rate assumptions, and 85 percent of them produced a net loss for the state.
These losses are projections, not money California has already lost. And announcing a move is not the same as evading taxes. The tax is based on residency as of January 1, 2026, so a public announcement of a move alone does not establish whether someone should pay it. Economists who helped design the measure say some prominent “leavers,” including Brin, likely remained California tax residents as of that date because of their continuing ties to the state.
The union sponsoring the measure, SEIU – United Healthcare Workers West, disputed the research. He told CBS News the proposal was intended to prevent California’s health care system from collapsing.
Other economists say losses won’t last
As Fortune reported in May, a separate NBER study by economists Jasper Boll, Emmanuel Saez and Gabriel Zucman reached a different conclusion. Even in an extreme scenario where every billionaire leaves the state permanently, it would take about 25 years for accumulated tax losses to match the proposed $100 billion windfall. Saez provided unpaid advice on the design of the ballot measure.
In an August revision, the authors increased their estimate of what California billionaires paid in income taxes in 2025 from $4.1 billion to $4.3 billion. The revision also directly challenges Stanford’s approach. The authors argue that it is inconsistent to view the wealth tax as one-off while treating the migration it triggers as permanent. If California doesn’t introduce new wealth taxes, they argue, some billionaires could eventually return, and the newly created fortunes could help replenish the state’s billionaire tax base.
The nonpartisan California Legislative Analysts Office offers a third view. He expects the tax to generate tens of billions of dollars over several years while potentially reducing annual tax revenue by less than $1 billion.
The debate comes as the wealth gap in the United States continues to widen. The richest 1% of U.S. households held a record 32.5% share of the country’s total net worth in the second quarter of 2026, up from 31.1% a year earlier, according to Federal Reserve data. The bottom half of households, meanwhile, held just 2.3%, compared to 2.4% a year earlier.
A $340 million fight and a governor on the other side
The proposed tax has already sparked a costly political battle. Tech billionaires have raised more than $340 million to oppose the measure and support related ballot initiatives, according to the Tutorwho reviewed campaign finance information. Brin, the largest donor, gave more than $100 million. Other donors include former Google CEO Eric Schmidt, Palantir co-founder Peter Thiel, Stripe CEO Patrick Collison and DoorDash CEO Tony Xu.
The opposition campaign spent at least $21.2 million in the first 19 days of September alone.
California Gov. Gavin Newsom also opposes the tax, arguing it could drive wealthy residents and their income taxes out of the state. On October 9, he approved Proposition 42, a competing measure financed by Brin. Proposition 42 would ban retroactive taxes and prohibit new state taxes on personal property, effectively blocking Proposition 40. Newsom instead proposed a national minimum tax on Americans worth more than $100 million.
Proposition 42 and a second countermeasure, Proposition 41, could each overturn the billionaires tax if either receives more yes votes than Proposition 40. Voters appear divided on the tax itself: a recent Citrin Center–Policy The poll found that 46% of likely voters were in favor and 43% against.
Not All Billionaires Are Heading Out
Nvidia CEO Jensen Huang, a longtime California resident, said he would be comfortable paying about $8 billion in taxes over five years. He called this ability a privilege, because Fortune reported Tuesday. Huang also urged people to move to California rather than leave.
Voters will decide whether to impose the tax on November 3. Even if it passes, competing measures could prevent it from going into effect, and it could take years to determine whether it ultimately leaves California better or worse off.
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