An NBER paper says California’s proposed billionaire wealth tax may raise far less than supporters claim and could reduce net revenue if rich residents relocate.
A new National Bureau of Economic Research working paper argues that California’s proposed billionaire wealth levy, slated for 2026, is unlikely to deliver the fiscal windfall its backers anticipate—and could even reduce state revenues once knock-on effects are counted.
The policy at the center of the analysis is the California Billionaire Tax Act, which would impose a one-time 5% tax on the worldwide net worth of individuals with more than 100 billion estimate in prior work by Galle and co-authors (2025). But in the new paper, economists Benjamin Jaros and Joshua Rauh contend that estimates like that understate how strongly the affected taxpayers may change behavior, particularly by moving out of state.
To quantify the likely tax base and how it might shrink, the authors draw on multiple sources: the Forbes Billionaire List to identify who would be subject to the levy; press and public records about residential real-estate holdings that help indicate where individuals live; and publicly reported announcements of billionaire relocations away from California. They then model revenue outcomes using several approaches, cross-checking their assumptions against academic research on how sensitive “wealth tax bases” are to tax changes.
Their central estimate is that the Act would raise about 28 billion to 100 billion figure cited in earlier projections. The estimate incorporates several adjustments that materially reduce the expected haul. First, the authors say publicly confirmed moves have already removed close to 30% of the potential wealth tax base. Second, they apply a “litigation-survival” discount—reflecting the possibility that legal challenges could narrow the tax or prevent full collection—before calculating expected receipts from those who remain.
Crucially, that 36 billion estimate is presented as revenue from the wealth tax alone, even before considering how the measure could erode other state tax streams. The authors emphasize income taxes as the most consequential spillover channel. Based on their calculations, California’s billionaire residents currently generate between 5.8 billion per year in state income tax payments.
Because the billionaire tax is designed as a one-time charge, while the income-tax stream tied to residency is ongoing, relocations have an outsized impact on long-run finances. Jaros and Rauh estimate that the present value of the income-tax revenue California would permanently lose due to billionaire departures is larger than the one-off wealth-tax gain. In their baseline net-present-value accounting, the result is a $38.9 billion loss for the state.
To test how sensitive that conclusion is to modeling choices, the paper runs 100,000 simulations that vary revenue estimates and discount rates. In 85% of those scenarios, the state ends up with a negative net present value—meaning the measure is more likely than not to be a net revenue loser over time.
Why it matters
If the paper’s estimates are correct, a policy intended to fund public priorities could instead shrink California’s long-run tax base by accelerating high-end outmigration. The findings sharpen a key question for lawmakers: whether a headline-grabbing, one-time levy can be designed in a way that withstands legal scrutiny and limits flight responses. The next watch point is how the proposal’s details evolve—and whether migration trends among ultra-wealthy residents continue ahead of 2026.