At the end of December, I wrote about the pro-spending lobbies pushing to put an insanely foolish retroactive wealth tax on the ballot later this year.
I followed up last month with a column about rich people prudently escaping the state.
Today, let’s look at why this issue will hasten California’s suicide, even if the initiative dies. Here’s a chart from Cal Matters, showing that rich people pay a huge proportion of the state’s income tax burden – with taxpayers above $1 million paying nearly 40 percent of the total.
At the risk of understatement, these are the people that are financing California’s bloated budget. A sensible leftist in California should want to be nice to these people (the same is true on the national level, but that’s a topic for another day).
But the greedy spending lobbies in the state are not sensible.
And now their proposed initiative is going to backfire. Big time.
Why? Because more and more rich people are leaving, which means no future revenue from a possible wealth tax. And it means a loss of the income taxes these people have been paying already.
This tweet is a helpful summary of what’s happening.
To be fair, Governor Newsom does oppose the initiative, presumably because it interferes with his ambitions to reach the White House.
But every other part of the tweet is right. Newsom has done a bad job and thus bears some of the blame for the initiative.
And there mere possibility of the initiative becoming law has spooked a lot of successful taxpayers.
The latest bit of evidence is from this new report in the Wall Street Journal by Katherine Clarke and Deborah Acosta. Here are some excerpts.
Billionaire Meta CEO Mark Zuckerberg and his wife, Priscilla Chan, are the latest California billionaires to buy a home in South Florida. …Zuckerberg is the latest tech billionaire to descend on Miami as California proposes a 5% billionaire tax; Florida offers no state income tax, which for billionaires like Zuckerberg and Bezos adds up to millions of dollars. Real-estate agents in South Florida say they have been working non-stop showing properties to Californians since the possibility of the new tax was announced. “The 5% tax in California is really driving out people in a major way,” said Danny Hertzberg, a Miami real-estate agent at Coldwell Banker Realty. The tax would apply retroactively to Jan. 1 of 2026, and Miami real-estate lawyers said they were working at a breakneck pace at the end of last year to close sales of multimillion-dollar properties. …Google co-founder Larry Page purchased several properties in the Coconut Grove area for roughly $188 million in the past few months and Sergey Brin has been under discussions to purchase a property in Miami Beach for $50 million, according to people familiar with the situation.
The article does not indicate that Zuckerberg has officially changed his tax residency, but I would be flabbergasted if this new purchase isn’t in part a way of avoiding the potential wealth levy.
By the way, Zuckerberg is just the latest in a long line of escaping entrepreneurs. Here are some passages from a report last month in the Washington Post by Elizabeth Dwoskin and Caroline O’Donovan.
…a slew of founders and other ultra-wealthy industry leadersare reducing their ties with the state, includinginvestors Sacks and Thiel. Thiel’s family office, Thiel Capital, sent out a news release about its relocation to Miami in late December; Sacks recently said that he had relocated to Austin, and was opening a branch of venture capital firm Craft Ventures there. Google co-founders Larry Page and Sergey Brin both made moves to reduce their footprints in California by transferring entities they control to other states… The wealth tax proposal is sponsored by the health care union Service Employees International Union-United Healthcare Workers West and…requires 875,000 signatures to get on the state ballot in November and must then win approval. …David Lesperance, a tax attorney, said that four of his clients, worth $600 billion collectively, have set relocation plans into motion — three to Florida and one to Texas. “Every one of my clients who ran the numbers [after Thanksgiving] came back immediately and said get me the hell out of here,” he said. “This is now a no-brainer.” …Billionaire venture capitalist Ben Horowitz, who resides in Las Vegas,recently echoed the point on a tech podcast: “It’s been so hard to break the Silicon Valley network effect,” he said. The tax, however, was “the best strategy I’ve seen.” …Andy Fang, the co-founder of the food-delivery company DoorDash, which is public, posted that the provision “could wipe me out” and that it would be “irresponsible for me not to plan [on] leaving the state.” …According to the Institute of Taxation and Economic Policy, a nonpartisan left-of-center think tank, the top 1 percent contribute 38 percent of California’s annual tax collections.
The U.K.-based Economist also wrote about this issue.
The magazine leans left, but you can see from these passages that the proposed wealth tax is viewed as being crazy.
Peter Thiel, Larry Page and Sergey Brin—three of the Golden State’s roughly 200 billionaires—have begun to move business to low-tax havens such as Florida and Nevada. …The Billionaire Tax Act would create a one-time 5% wealth tax for California residents whose net worth exceeds $1.1bn. The measure was dreamt up by the SEIU, a health-care union… The initiative has yet to make the ballot (its supporters have until June 24th to collect the nearly 900,000 signatures needed). …California’s Legislative Analyst’s Office suggests that attempting to solve the problem with a one-time wealth tax could imperil the state’s general fund in the long term. As recently as 2022 nearly 40% of personal income taxes in California were paid by the top 1%. If a wealth tax drives those golden geese away, that means less money for public services. …Enrico Moretti, an economist at the University of California, Berkeley, found that billionaires (especially old ones) will move to avoid estate taxes when the state enacting them already imposes a high income-tax burden. “The state is not the right jurisdiction to tax high-net-worth individuals,” says Mr Moretti. You don’t have to leave America to avoid the levy, he adds. “All you have to do is go to Texas or Florida.”
Last but not least, here are some excerpts from a story by Jordan Pandy for Business Insider.
…billionaire Don Hankey, the chairman of Hankey Group and a lifelong Californian worth a reported $8.2 billion. Hankey is one of a handful of Californians who have decided leave the state due to the proposed Billionaire Tax Act — a bill that would subject California residents worth more than $1 billion to a one-time tax worth 5% of their assets. For someone like Hankey, that’s about $410 million. …Nevada has welcomed Hankey and other high-net-worth individuals with open arms. For the ultrawealthy ready to ditch California, but not the West Coast, Nevada offers a happy medium. With tax perks similar to Florida’s — no income tax and low property taxes — Nevada is slowly becoming the next nerve center for the rich. …while Las Vegas’ luxury market was already heating up, the news out of California kicked it into a higher gear. …Zain Aziz, the founder of technology firm Atom…moved to the Las Vegas suburb of Henderson, Nevada, in 2025. He said leaving the high taxes and hectic lifestyle of Silicon Valley behind was bittersweet. “You don’t really want to get punished if you do good and you create more jobs,” Aziz said. …Billionaire Larry Ellison, who owns homes across the country and the world, bought a handful of properties in Lake Tahoe near the California-Nevada border. He also recently sold his San Francisco home for $45 million.
P.S. I don’t think the proposed wealth tax will even make the ballot, much less pass. But if I’m wrong, I’ll make an easy prediction that it will be just a matter of time before the tax winds up hitting more than the super-rich.
P.P.S. This column has focused on the proposed wealth tax’s impact on domestic migration. If you want economic analysis that explains why wealth taxation is very foolish, click here, here, here, here, here, here, and here.
