Economists Estimate California Billionaire Tax could Leave State $38.9 Billion Worse Off

Researchers affiliated with Stanford University’s Hoover Institution estimate that California’s proposed billionaire wealth tax could raise substantially less revenue than its supporters project and result in long-term losses to state finances.

Economists disagree over the potential revenue and economic effects of California’s proposed billionaire wealth tax.

Benjamin Jaros and Joshua Rauh estimate that the measure could generate approximately $30 billion, with a range of $28 billion to $36 billion, according to their paper published through the National Bureau of Economic Research (NBER) in October 2026.

The proposal, known as Proposition 40, would impose a one-time 5% tax on the worldwide net worth of individuals worth at least $1 billion who meet the measure’s eligibility requirements.

Supporters have projected that the tax could raise about $100 billion. Jaros and Rauh argue that the amount collected could be significantly lower, in part because some wealthy residents have reportedly left California before the proposed measure’s residency cutoff.

Their paper estimates that publicly confirmed departures have removed nearly 30% of the proposed tax’s potential wealth base.

The authors also account for the possibility that some of the remaining tax base could be reduced by legal challenges or further migration.

The researchers estimate that California’s billionaires contribute between $3.3 billion and $5.8 billion annually in state income taxes.

Their analysis concludes that the present value of income-tax revenue potentially lost because of departures could exceed the one-time revenue raised by the wealth tax, leaving the state with an estimated net loss of $38.9 billion.

In 100,000 simulations using different revenue and discount-rate assumptions, the paper found that 85% of modeled scenarios resulted in a negative net present value for state revenue.

These findings are projections based on the authors’ assumptions, not a guarantee of the tax’s eventual financial impact.

The results depend on how many wealthy residents leave, how courts treat the measure, how the tax is implemented and the amount of income-tax revenue the state would otherwise collect.

Other economists, including Emmanuel Saez and Gabriel Zucman, have challenged the pessimistic estimates of wealth-tax revenue and the assumptions about taxpayer migration.

Their research argues that the proposed tax could raise approximately $100 billion, with comparatively limited losses from wealthy residents relocating.

The competing analyses reflect substantial disagreement over how billionaires would respond to the tax and how those decisions would affect California’s finances over time.