California’s proposed billionaire tax could leave the state with less revenue than it would otherwise collect, according to new research from two Stanford University economists. The research arrives two weeks before voters finally get to decide the measure on November 3.
In a working paper published by the National Bureau of Economic Research, Benjamin Jaros and Joshua Rauh estimate that Proposition 40 would raise about $30 billion.
That is less than a third of the $100 billion backers project could be generated from the measure, which would impose a one-time 5% levy on the net worth of California residents worth $1 billion or more.
The shortfall comes down to who is still around to tax. Seven billionaires have publicly left the state, among them Peter Thiel and Google co-founders Larry Page and Sergey Brin. Together they took roughly $540 billion, or 30% of California’s billionaire wealth, out of reach. The authors believe others have moved quietly.
The paper projects that a smaller billionaire population could cost California $1 billion to $3.5 billion a year in income tax collections. If those losses persist, their present value would exceed the wealth tax proceeds by about $39 billion.
"These findings suggest that the Billionaire Tax Act will not fulfill the primary functions for which it was designed," Jaros and Rauh said.
Alluding to a potential stealthy flight of wealth from the state, the two concluded that “behavioral response prior to voting has eroded most of the projected tax base.”
For advisors serving ultra-high-net-worth families, the look-back provision matters most. The tax applies to anyone who was a California resident on January 1, 2026, so moving now may not avoid it. The Franchise Tax Board would also test whether a departure was genuine.
California’s nonpartisan Legislative Analyst’s Office expects a temporary gain of tens of billions of dollars. That gain would be partly offset by a possible ongoing decline of less than $1 billion a year in income tax receipts.
Service Employees International Union-United Healthcare Workers West, which sponsored the initiative, rejected the Stanford findings. In a statement to CBS News, union vice president Debru Carthan dismissed the research.
"[The proposition's] sole purpose is to ensure that billionaires finally pay their fair share to prevent a collapse of California's healthcare system," Cathan said. "And Californians like me are seeing right through these misinformation campaigns."
Rep. Ro Khanna, a Democrat who represents California’s 17th congressional district, is counting on a far larger haul. In an op-ed published by The Guardian, he insisted that the tax would raise about $100 billion, with 90% going to healthcare spending to help keep 3 million Californians from losing coverage.
“Proposition 40, California’s billionaire tax, is the most important ballot initiative in America and a fight for the soul of our party,” Khanna wrote, comparing the vote to Wisconsin pioneering the income tax in 1911.
For his part, Governor Gavin Newsom has continued his own fight against the billionaire tax plan. Earlier this month, he endorsed Proposition 42, a Brin-funded measure that would cancel the tax and bar new state taxes on personal property, putting him at odds with the Democratic Party line in his state.
Voters appear torn. A UC Berkeley Citrin Center–Politico poll published Monday found 46% of likely voters favor Proposition 40 and 43% oppose it. The same pollsters measured 50% support among registered voters in February.
“Californians do think billionaires should pay more,” Cohen, founder and CEO of polling firm TrueDot told Politico, adding that “it doesn’t translate so easily into them voting for this tax.”
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