California voters are preparing to decide on a proposed tax targeting the state's billionaires, a move that is intensifying debate as IRS data indicates a significant outflow of taxpayers and income from the state.
The proposed ballot initiative, backed by the Service Employees International Union, would implement a one-time 5% wealth tax on Californians with a net worth exceeding $1 billion. The measure, which has qualified for the November ballot, would apply retroactively to residents as of January 1, 2026.
Proponents argue the tax could generate billions for healthcare and education. However, critics, including billionaire investor Mark Cuban, warn that such a policy could push not only wealthy individuals but also investment capital and startups out of California. Cuban has stated that if the measure passes, he would direct future investments away from the state and suggested that "only idiot startup founders stay in Cali."
Gabriela von zur Muehlen, chief policy officer for the Texas Association of Businesses, noted that high-tax states like California and New York are contributing to wealth, jobs, and investment flowing toward Texas.
This debate occurs as California experiences a notable exodus of taxpayers. According to IRS data compiled from federal tax returns, Los Angeles County led the nation in taxpayer losses, with a net of 17,496 tax filers leaving and taking nearly $1.9 billion in income with them. Other California counties, including Orange, San Diego, Riverside, and San Bernardino, also recorded substantial outflows of tax filers.
The movement of taxpayers and their associated income can impact state and local tax revenues, which are crucial for funding public services such as schools, public safety, and infrastructure. California Democratic Gov. Gavin Newsom has expressed opposition to the proposed state billionaire tax, while simultaneously advocating for a similar national tax.