California's historic wealth tax vote

California voters are deciding on Proposition 40, which would create America's first wealth tax targeted at billionaires. It follows Proposition 13 in 1978, a historic tax revolt that launched the Reagan revolution.

What Proposition 40 would do

The tax would impose a one-time five percent tax on the net worth of billionaires, with some assets exempted. It applies retroactively to anyone who was a California resident on January 1, 2026.

Money earmarked for healthcare

Revenue from the wealth tax would be earmarked mostly for healthcare of low-income Californians, to help offset federal cuts to Medicaid.

Zucman's case for the tax

Economist Gabriel Zucman, who helped design wealth tax proposals for Senators Elizabeth Warren and Bernie Sanders, supports Proposition 40. He co-authored an analysis estimating it could raise about one hundred billion dollars.

Zucman's vision for national change

Zucman believes California's wealth tax could spark a broader movement. He told Planet Money it would pave the way for a federal wealth tax and an international movement to tax the superrich.

“If California says, 'We can tax billionaires. We can tax the wealthiest, most powerful people in the world,' it will be the beginning of not only a broader U.S.-wide movement, ultimately paving the way for a federal wealth tax, but I think it will be the beginning of an international movement.”

Rauh's opposing analysis

Stanford economist Joshua Rauh and Benjamin Jaros reached a wildly different conclusion. They estimate Proposition 40 could actually cost California thirty nine billion dollars, not raise money.

“It would not raise $100 billion for the state.”

Billionaire wealth in California

Zucman's team found California billionaires' wealth reached two point three trillion dollars by mid-2026, as large as all annual income reported on income tax returns of all Californians.

Explosive wealth growth

California billionaire wealth exploded by one hundred forty four percent between 2023 and 2025, thanks largely to the AI boom. Over the longer run, billionaire wealth multiplied by twenty five from 1982 to 2026.

Why past wealth taxes failed

Wealth taxes have been tried around the world with dismal results. Even Zucman acknowledges past wealth taxes have been abject failures, often due to loopholes that allowed the rich to shelter assets.

France's cautionary tale

France scrapped its wealth tax in 2018 after it exempted qualifying business assets, creating a big loophole. Critics point to estimates that tens of thousands of millionaires left while the tax was in place.

Norway's different experience

Zucman points to Norway, which has had a wealth tax since 1892. A recent working paper found that recent increases drove at most one hundred rich people to leave, without denting wealth-tax revenue gains.

Seven billionaires already departed

Rauh argues at least seven famous billionaires left California before the January 1, 2026 residency cutoff: Larry Page, Sergey Brin, Peter Thiel, Don Hankey, Steven Spielberg, Travis Kalanick, and David Sacks.

Thirty billion dollars lost to departures

Those seven billionaire departures alone, Rauh says, reduced potential revenue from the wealth tax by around thirty billion dollars. Zucman disputes that their fortunes are beyond California's reach.

The residency question

Zucman argues that ending California tax residency takes more than a last-minute move. Proposition 40 was announced in late October 2025, giving billionaires only about two months to establish residency elsewhere before January 1, 2026.

Sergey Brin's Nevada move

Sergey Brin moved to Nevada's Lake Tahoe side and spent more than one hundred million dollars trying to defeat Proposition 40. Zucman says Brin still frequently commutes to work in Silicon Valley.

Constitutional challenges ahead

Rauh believes billionaires will mount constitutional challenges to Proposition 40. The retroactive provision, taxing based on where billionaires used to live, could violate due process protections.

Silicon Valley's economic pull

California's thriving tech ecosystem could keep billionaires there despite the tax. In 2025, Bay Area companies attracted three-quarters of all U.S. AI funding and more than half the worldwide total.

Zuckerberg's deal to stay

Mark Zuckerberg reportedly struck a deal with Meta's board to pay the wealth tax without sacrificing control. He agreed to stay in California for eight years, with Meta remaining headquartered there.

Huang's support for the tax

Nvidia CEO Jensen Huang told Bloomberg in January he was perfectly fine paying the wealth tax. Under Proposition 40, he would owe something like eight billion dollars.

“I've got to tell you, I have not even thought about it once. We chose to live in Silicon Valley, and whatever taxes they would like to apply, so be it. I'm perfectly fine with it.”

The stakes for America

California voters are deciding whether to pursue a historic wealth tax experiment that could influence tax policy around the nation and the world.The superrich have poured three hundred thirty three million dollars into defeating it.