The 5 percent wealth tax proposed in California seems like a minor means to generate revenue. This approach would likely face opposition from billionaires. However, a wide array of leaders, including Planned Parenthood Affiliates of California, the California Teachers Association, and Governor Gavin Newsom, oppose it.
These critics highlight significant concerns. The plan intends to tax assets of ultrawealthy Californians. Yet, a closer examination reveals that it could harm the state’s financial stability.
Looking at international precedents, numerous countries faced challenges with wealth taxes. In 1990, 12 countries implemented such taxes. By 2025, only three remained. Countries like Denmark, Sweden, Germany, the Netherlands, and France repealed these taxes over time. They found wealth taxes difficult to manage and saw wealthy individuals relocating, resulting in lower-than-anticipated revenue.
France, a nation where tax plan co-authors are from, annulled its wealth tax in 2018. An estimated 200 billion euros left France over two decades, creating a yearly budget shortfall of 7 billion euros.
“History suggests that what happened in France could very well transpire in California, likely with more severe consequences.”
Analysis of 212 California billionaires targeted by the tax predicts revenue of $40 billion, far below the touted $100 billion. Notable billionaires, such as Google co-founders Sergey Brin and Larry Page, exited California before the December 31, 2025, residency cutoff. About 30 percent of the state’s billionaire wealth tax base left, diminishing potential revenue.
The emigration of wealthy residents poses significant risks. Each departing billionaire takes with them a continuous stream of income tax revenue, which would have increased over time. Moving out of state is easier than leaving a country, exacerbating the situation compared to European experiences.
California’s experiment with wealth taxes might offer valuable lessons. While on paper it appears benign, the real-world implications could be profound, prompting introspection about fiscal strategies and the economic environment.