Billionaires fleeing California could turn a $30 billion tax windfall into a $39 billion loss, Stanford economists warn

Proposition 40, on California’s Nov. 3 ballot, would impose a one-time 5% tax on the net worth of the state’s few hundred billionaires who were residents on Jan. 1, 2026. The tax would be due in 2027, and those who choose to spread payments over five years would pay more. Real estate, pensions, and most retirement accounts would generally be excluded.

Benjamin Jaros and Joshua Rauh, economists affiliated with Stanford University’s Hoover Institution, see a much smaller payday. In a working paper published this month by the National Bureau of Economic Research (NBER), they estimate the tax would collect about $30 billion, in a range of $28 billion to $36 billion. That is less than a third of what proponents expect.

Their main explanation is simple: Billionaires can move.

The researchers used Forbes billionaire rankings, real estate reports, and public relocation announcements. From those, they estimate that billionaire departures have already eliminated nearly 30% of the proposed tax base. Seven billionaires who have publicly moved out of California account for roughly $540 billion in wealth, CBS News reported, citing the study. They include Peter Thiel and Google cofounders Larry Page and Sergey Brin. The estimate also discounts what remains of the base for the risk that courts strike the tax down.

The new figure is a sharper downgrade than the authors’ earlier Hoover analysis. That analysis projected about $40 billion in revenue and a $25 billion net loss for the state.

Why the Stanford economists see a $39 billion hole

Still, $30 billion is hardly pocket change. The researchers’ bigger concern is what happens after the state collects it.

They estimate that billionaire departures could cost California $1 billion to $3.5 billion a year in lost income tax revenue. If those losses continue indefinitely, the future shortfall would outweigh the one-time wealth tax proceeds by $38.9 billion in today’s dollars. The researchers ran 100,000 simulations using different revenue and discount-rate assumptions, and 85% produced a net loss for the state.

Those losses are projections, not money California has already forfeited. And announcing a move is not the same thing as escaping the tax. The tax is based on residency as of Jan. 1, 2026, so a public relocation announcement alone does not establish whether someone would owe it. Economists who helped design the measure argue that some high-profile “leavers,” including Brin, likely remained California tax residents on that date because of their ongoing ties to the state.

The union sponsoring the measure, SEIU–United Healthcare Workers West, disputed the research. It told CBS News the proposition is meant to prevent the collapse of California’s health care system.

Other economists say the losses won’t last

As Fortune reported in May, a separate NBER study by economists Jasper Boll, Emmanuel Saez, and Gabriel Zucman reached a different conclusion. Even in an extreme scenario where every billionaire permanently left the state, it would take roughly 25 years for accumulated income tax losses to match the proposed $100 billion windfall. Saez provided unpaid advice on the ballot measure’s design.

In an August revision, the authors raised their estimate of what California billionaires paid in state income taxes in 2025 from $4.1 billion to $4.3 billion. The revision also challenges the Stanford approach directly. The authors argue it is inconsistent to treat the wealth tax as one-time while treating the migration it triggers as permanent. If California does not introduce further wealth taxes, they argue, some billionaires could eventually return, and newly created fortunes could help replenish the state’s billionaire tax base.

California’s nonpartisan Legislative Analyst’s Office offers a third view. It expects the tax to generate tens of billions of dollars over several years while potentially reducing annual income tax revenue by less than $1 billion.

The debate comes as America’s wealth gap continues to widen. The richest 1% of U.S. households held a record 32.5% of the nation’s total net worth in the second quarter of 2026, up from 31.1% a year earlier, according to Federal Reserve data. The bottom half of households, meanwhile, held just 2.3%, down from 2.4% a year earlier.

A $340 million fight, and a governor on the other side

The proposed tax has already sparked an expensive political battle. Tech billionaires have raised more than $340 million to oppose the measure and support related ballot initiatives, according to the Guardian, which reviewed campaign finance disclosures. Brin, the largest donor, has given more than $100 million. Other donors include former Google CEO Eric Schmidt, Palantir cofounder Peter Thiel, Stripe CEO Patrick Collison, and DoorDash CEO Tony Xu.

The opposition campaign spent at least $21.2 million in the first 19 days of September alone.

California Gov. Gavin Newsom also opposes the tax, arguing it could drive wealthy residents and their income tax payments out of the state. On Oct. 9, he endorsed Proposition 42, a Brin-funded competing measure. Prop 42 would bar retroactive taxes and ban new state taxes on personal property, effectively blocking Prop 40. Newsom has instead proposed a national minimum tax on Americans worth more than $100 million.

Prop 42 and a second countermeasure, Proposition 41, could each nullify the billionaire tax if either receives more yes votes than Prop 40. Voters appear split on the tax itself: A recent Citrin Center–Politico poll found 46% of likely voters in favor and 43% opposed.

Not every billionaire is heading for the exit

Nvidia CEO Jensen Huang, a longtime California resident, said he would be comfortable paying an estimated $8 billion in taxes over five years. He called that ability a privilege, as Fortune reported Tuesday. Huang has also urged people to move to California rather than leave.

Voters will decide whether to impose the tax on Nov. 3. Even if it passes, competing measures could keep it from taking effect, and it could take years to determine whether it ultimately leaves California better or worse off.