California is voting on Proposition 40, which would impose a one-time 5% wealth tax on billionaires—the first such tax in America. The measure would apply to individuals with net worth exceeding $1 billion who were California residents on January 1, 2026, with revenue directed toward healthcare for low-income residents. The tax would encompass various assets including publicly traded stocks, real estate, artwork, yachts, and other high-value property.
Economist Gabriel Zucman of UC Berkeley and the Paris School of Economics, who helped design national wealth tax proposals for prominent political figures, co-authored an analysis projecting the tax could generate approximately $100 billion in revenue. Zucman argues that the existing tax system fails to adequately tax the superrich, who structure finances to minimize taxable income. He contends a wealth tax addresses inequality and the political influence of the wealthy. Zucman’s analysis notes that California billionaire wealth reached $2.3 trillion by mid-2026 and has grown 144% between 2023 and 2025, largely due to artificial intelligence sector gains.
Stanford economist Joshua Rauh, a fellow at the Hoover Institution, presents a contrasting assessment. In collaboration with Benjamin Jaros, Rauh projects the tax would trigger billionaire migration out of California, reducing income tax revenue and ultimately costing the state $39 billion rather than generating funds. He questions assumptions underlying the Zucman group’s revenue projections, particularly regarding the anticipated rate of tax avoidance.
The debate reflects broader national concerns about wealth taxation policy. Opponents have contributed $333 million to defeat the proposition, according to recent reporting. California’s decision may influence tax policy discussions nationwide and internationally, with Zucman predicting a successful measure could catalyze a movement toward federal and international wealth taxation on the superrich.
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