Billionaires fleeing California could turn a $30 billion tax windfall into a $39 billion loss, Stanford economists warn

Two Stanford economists have warned that California's proposed billionaire tax could result in a $39 billion loss for the state, despite initial projections of raising $100 billion. The tax, if passed, would impose a one-time 5% tax on the net worth of California's few hundred billionaires who were residents on Jan. 1, 2026. The researchers estimate the tax could only collect around $30 billion, accounting for a range of $28 billion to $36 billion.

They attribute the difference in projections to billionaires moving out of the state to avoid the tax. Seven well-known billionaires, including Google co-founders Larry Page and Sergey Brin, have publicly left California, accounting for roughly $540 billion in wealth. The researchers also factor in the risk of courts striking down the tax, leading to a sharper downgrade from their earlier estimate of $40 billion in revenue and a $25 billion net loss for the state.

The estimated $30 billion revenue could be outweighed by $38.9 billion in lost income tax revenue over time if billionaire departures continue. Critics argue the losses won't last indefinitely, citing a separate study that suggests it would take 25 years for accumulated income tax losses to match the proposed tax windfall.