Newsom steps up fight against California’s billionaire tax plan

California Governor Gavin Newsom is escalating his push to block a proposed wealth tax on the state’s richest residents, setting up a high-stakes clash that advisors say could reshape planning strategies for ultra-wealthy clients.

To recap: the 2026 Billionaire Tax Act would impose a one-time 5% levy on the total wealth of California tax residents with a net worth of $1 billion or more.

The contentious initiative, backed by the Service Employees International Union, still needs roughly 900,000 signatures to qualify for the November ballot but is already emerging as a political and financial flashpoint.

As noted by the Guardian, Newsom has no formal veto power over a ballot initiative but has made clear he wants the measure defeated. In recent interviews, he said his office is actively working to stop the proposal, citing the risk that tech founders and investors could accelerate their exodus from the state.

He told Politico the measure is validating his earlier warnings as high-profile billionaires shift assets and residences. “This is my fear. It’s just what I warned against,” Newsom told Politico. “It’s happening.”

For advisors, one of the most consequential features is the proposal’s timing. Unlike typical tax changes that take effect after voter approval, the billionaire tax would apply to those who were California residents as of Jan. 1, 2026. Tax attorneys say that retroactive start date leaves little room for billionaires to change residency after the fact.

“The reason they did this is obvious,” Christopher Manes of Manes Law told CNBC. “If they had made the date in November, after passage, you’d have 200 people who could get out in time and save millions of dollars.”

The union backing the measure has argued that billionaires should not be able to “avoid responsibility by moving their assets or claiming residency elsewhere,” and estimates the tax could raise around $100 billion to shore up state healthcare and education funding.

At the same time, groups such as the California Business Roundtable and donors including Palantir founder Peter Thiel are bankrolling opposition campaigns, arguing the tax would push investment and talent out of the state, which according to CNBC has between 200 and 250 billionaires.

The proposal is already affecting behavior. Some tech billionaires have publicized moves or expanded footprints in lower-tax states, while others appear unfazed. Nvidia chief executive Jensen Huang told Bloomberg he has “not even thought about it once,” adding, “We chose to live in Silicon Valley, and whatever taxes I guess they would like to apply, so be it.”

Advisors serving billionaire clients now face a complex set of variables: California’s “closest connection” residency test, the logistics of proving a genuine move, and a measure that may never become law but is already prompting relocation planning.

Legal experts expect aggressive court challenges, particularly against the retroactive component. Jon Feldhammer, a tax partner at Baker Botts, said some clients are weighing moves this year, even after the Jan. 1 effective date, given the strength of potential due process arguments. Beyond that, he said some households he works with are considering an exit from the state.

“You’re talking about the most portable class in America,” he told CNBC. "They have the means and ability to move very quickly.”