After gathering over 1.5 million signatures for the November ballot initiative, proponents of a 5% wealth tax on California billionaires will speak on Monday.
On Wednesday, May 6 at 1:30 p.m. Eastern time, join BourseWatch for a live discussion regarding teen investment. To participate in the Q&A, register and send in your questions here.
Following the significant changes to federal income taxes last year, this year is expected to represent a turning point for state income taxes. It might also serve as a significant test of whether wealthy households relocate in response to tax increases.
On Monday, proponents of a 5% wealth tax on billionaires in California announced that they had gathered over 1.5 million signatures, which is more than enough to place the proposal on the November ballot.
The ballot item is a reaction to the big Republican package passed last year, which reduced money for anti-hunger and low-income health programs while extending and creating new tax cuts.
The Golden State’s one-time wealth tax would be the first in the country if it were approved and supported in court. The California tax might not even be implemented if it is passed into law because it is still unclear whether it is permissible for a state to levy taxes based on net worth.
Billionaires will benefit from the money, according to Suzanne Jimenez, chief of staff of SEIU United Healthcare Workers West, a union that has been spearheading the ballot issue. “They can figure out how to purchase their fifth home and a yacht. We think they can pay a 5% lump sum or at least 1% annually,” she told reporters on Monday.
The union-led campaign for the ballot proposal projects that the One Big Beautiful Bill Act and its effects will cost California’s healthcare system $100 billion over the next five years. “This initiative is a dollar-for-dollar solution,” Jimenez declared.
A change that has been occurring since the outbreak was accelerated by the GOP’s expansive 2025 tax and spending bill. Lower, more straightforward income-tax legislation has been the emphasis of more Republican-leaning states. Legislators in Democratic-leaning states, however, have their eyes set on raising taxes on their affluent citizens. Red states are embracing the GOP’s tax-cut philosophy, while blue states seem to be stepping up their tax increases to offset the bill’s cutbacks.State tax laws are generally divergent, according to Lucy Dadayan, principal research associate at the Tax Policy Center.
While Maine recently imposed an additional 2% income tax on people earning more than $1 million, lawmakers in Washington state have already passed a 9.9% income tax on millionaires.
The Empire State is currently considering a “pied-à-terre” tax for New York City. When an owner’s primary house is located elsewhere, the tax would target homes, cooperatives, and condominiums valued at more than $5 million.
Then, a countermovement to lower taxes and simplify the rates and complexity is emerging; this trend usually takes place in places that lean Republican.
The state income tax in Missouri is getting closer to being abolished. Voters will determine later this year whether the legislature can abolish the state’s income tax by expanding and raising sales taxes. Missouri eliminated its capital gains taxes last year.
Currently, nine states—including Florida and Texas—do not impose an income tax. With income taxes at the top of the scale but no income tax for the majority of people, Washington is currently in the middle.
Eight states have flat income tax rates in 2015; these states are more likely to be Republican. According to Dadayan’s figures, that has nearly doubled, reaching 15 states at the beginning of the year.
There were only two states having millionaire-specific tax brackets in 2015; today, there are seven: California, Massachusetts, Maryland, New Jersey, New York, Maine, and Washington. In the 2024 presidential election, Kamala Harris won the popular vote in each of those seven states.
According to Dadayan, the One Big Beautiful Bill Act may be compelling state legislators to make difficult choices over which side to support in the developing story of two tax codes. According to Dadayan, states might reduce their services for citizens or attempt to make up the difference by raising taxes from other sources, especially the wealthiest citizens.
According to Andrew Wilford, director of state policy at the conservative National Taxpayers Union Foundation, the disagreement stems from a philosophical difference. States that aim to compete as prospective resident destinations and those that are focused on increasing revenue now—often by reaching out to wealthy households—are at odds.
He sees it as a decision between “do we want to drive them out because we want a one-time sugar high?” and making plans for the future.
Indeed, not all Democrats are in favor of taxing the wealthiest citizens more heavily. For instance, Gavin Newsom, the Democratic governor of California, opposes the billionaire’s tax. Simultaneously, Sen. Bernie Sanders of Vermont and Representative Ro Khanna of California co-sponsored a bill to incorporate an annual wealth tax into the federal tax law.
Exodus or anecdotes?
The ballot initiative in California is designed to apply to residents starting on January 1, 2026.
There was a rush of well-known people leaving the state toward the end of 2025. Florida homes and real estate were acquired by billionaires including Larry Page and Sergey Brin, co-founders of Google (GOOGL). Peter Thiel’s private investment company, Thiel Capital, declared it was setting up shop in Miami. According to the Dec. 31 release, Thiel had established “a significant presence in Miami over the last several years.” Jensen Huang, the CEO of Nvidia (NVDA), has previously stated that he is “perfectly fine” with the tax.
“I fled socialism with my family in 1979 and know the devastating, oppressive society it created in the Soviet Union,” Brin said in a comment to the New York Times. California shouldn’t wind up in the same situation.
Whether the California exits are individual incidents or an indication of an exodus is the question. The wealth tax’s proponents claim that it won’t cause a large-scale exodus from California. Jimenez stated that “people don’t leave the state that they are from.” According to the ballot-measure campaign, the tax would affect about 200 households.
Research indicates that, particularly as they get older, billionaires end refuge in jurisdictions without estate taxes.
One of the several states without an estate tax at the state level is California. The federal estate-tax exemption was kept from declining under the GOP tax package. This year, each person is protected from $15 million in gift and estate taxes.
However, according to Dadayan, tax bills are not the primary factor influencing people’s decision to relocate. The calculus also takes into account factors like the weather, employment prospects, and family proximity, she said.
However, according to Internal Revenue Service data, many of the locations that are attracting the greatest number of inhabitants also happen to be states with either low or flat taxes or none at all.
According to a Tax Foundation analysis, the top four states that had an increase in income tax filers between 2022 and 2023 were Texas, Florida, North Carolina, and South Carolina. There is no state income tax in Florida or Texas.
New York was one of the greatest losses, losing over 72,000 filers in 2023. New Jersey lost about 20,000 and Illinois lost over 28,000. California, which lost almost 100,000 income tax registrants that year, was at the top of the list.
