With all this talk about a Millionaires’ Tax in Washington state, California may provide a crystal ball into what may happen here in the Evergreen State. After passing a “Millionaires’ Tax” in 2004, then a “Very-High Earner” tax on those making over $250,000 passed in 2012, now Californians may be hit with a new “Billionaire Tax.”
The 2026 Billionaire Tax Act proposes a 5% annual tax on California’s billionaires’ net worth exceeding $1 billion, starting January 1, 2027, to raise $20-40 billion yearly for healthcare, but includes residency rules that taxes former residents for five years post-departure. If the proposed ballot initiative garners the 900,000 signatures needed to qualify, it will be on the November 3, 2026, election ballot.
An initiative from SEIU-UHW targets worldwide assets including illiquid tech stocks with rules presuming full control value for voting shares. If passed, the new tax would apply a tax on ALL property owned, not just real estate but stocks, bonds, furniture, autos, cash, gold, silver – everything. In other words, if a person has a positive net worth but very little cash, the state of California would tax the value of the net worth, resulting in a tax bill to be paid by the taxpayer to the state.
Since 2004 California has had and continues to have a “Millionaires’ Tax” which started at 1% and now 14.3%.
In 2004, California voters approved Proposition 63, known as the Mental Health Services Act, which imposed an additional 1% tax on taxable income exceeding $1 million. This was explicitly described as a “millionaire tax” in economic analyses and was designed to fund mental health services. It took effect in 2005 and remains in place today.
In 2012, Proposition 30, introduced by former Gov. Jerry Brown (D), imposed higher marginal income tax rates for high earners, including a top rate of 13.3% on incomes over $1 million (for single filers; brackets are doubled for joint filers).
Proposition 30 added three new personal income tax (PIT) rates for “very-high-income” earners in California through 2018:
- A 10.3 percent tax bracket for single filers’ taxable income between $250,001 and $300,000 and joint filers’ taxable income between $500,001 and $600,000;
- An 11.3 percent tax bracket for single filers’ taxable income between $300,001 and $500,000 and joint filers’ taxable income between $600,001 and $1 million; and
- A 12.3 percent tax bracket for single filers’ taxable income above $500,000 and joint filers’ taxable income above $1 million.
So, the Millionaires’ Tax now expanded to a “Very-High-Income” Tax starting at $250,001.
This were to sunset in 2018, but was extended through 2030 with the passage of Proposition 55 in 2016. Combined with the 1% Millionaires’ Tax passed in 2004; this resulted in an effective top state income tax rate of 14.3% for those earning over $1 million.
Now that California is facing multi-year structural deficits that balloon to over $22 billion in 2027—the same year the proposed Billionaires’ Tax is to take effect—total net worth is now a viable option to tax.
A New York Post article from January 12, reports that California has lost nearly $700 billion in wealth in the past month due to fears over a proposed “Billionaire Tax” ballot initiative. This exodus reduced the estimated $2 trillion taxable base to now $1.3 trillion, with projections that it could fall below $1 trillion by year’s end.
Recent green-flight from California: Google co-founder Larry Page linked to 45+ LLCs going inactive or relocating, including a $71.9 million Miami mansion purchase; Sergey Brin tied to 15 LLCs moving to Reno, Nevada; In-N-Out heiress Lynsi Snyder shifting to Tennessee with a new corporate office.
Chamath Palihapitiya—a venture capitalist, former Facebook executive, and one of California’s wealthiest residents—described the exodus as a “complete and total unforced error” that could lead to budget shortfalls, lawsuits, and potential tax hikes on the middle class if not addressed.
Governor Newsom now opposes the initiative saying it is a “race to the bottom.”
A poll conducted by David Binder Research found that support for the Billionaires’ Tax dropped from 55% to 41%, while those opposing the initiative surged to 53%. The poll surveyed 800 likely California voters from Dec. 6-10. It was conducted in both English and Spanish and had a margin of error of 3.5%.
Author: Mario Lotmore
