Economic Impact

They predicted billionaires wouldn’t leave the state. They were wrong.

· 3 min read

Although the Prop 40 proponents repeatedly claimed wealth would not leave the state, economists have documented that the proposed wealth tax has already removed more than half a trillion dollars–or nearly 30% of aggregate billionaire wealth–from California’s tax base.

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“...very unlikely to have happened”

Professor Saez, Stanford Institute for Economic Policy Research Economic Summit. March 2026

Have some billionaires already left? No—that is very unlikely in most cases.”

— Academic paper, co-authored by Professor Saez · Feb 2026(Feb 2026)

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“There is absolutely no evidence…”

Dave Regan, President of SEIU-UHW on KCRA TV. June 2026

Well their claims (on wealth flight) are entirely fabricated. There is absolutely no evidence.”

— Dave Regan, President of SEIU-UHW, on KCRA TV · June 2026(June 2026)

It is improbable that any significant number of billionaires fully cut ties with California in that short period.”

— Professors Saez and Zucman, New York Times · May 2026(May 2026)

The proponents of Prop 40 have insisted that wealth won’t leave the state or that critics are exaggerating the risks. But as anyone who had read the news recently may have noticed, wealth is fleeing California at an unprecedented scale:

  • Economists from Stanford, the Andersen Institute, Columbia, and UC Berkeley, have estimated that departures from the proposed wealth tax have already removed more than half a trillion dollars—or nearly 30% of aggregate billionaire wealth–from California’s tax base. This represents $536 billion in permanently lost taxable net worth.
  • Stanford economists confirm that based on these departures, Prop 40 will collect closer to $40 billion over 5 years, not the $100 billion promised. They further estimate that the permanent loss of income taxes from the departing residents will end up costing the state -$24.7 billion in lost tax revenue.
  • UC Berkeley economist Enrico Moretti—whose past research has covered the mobility of wealth across state lines—laid out in a Los Angeles Times op-ed the clear risks of Prop 40 to California’s economy, as wealth is easily mobile across state lines.
  • Prop. 40 will not only fail to deliver the revenue promised, it will blow a massive hole in California’s budget, safety net, and economy. This means: less money for schools, healthcare, roads, housing affordability efforts, public safety, wildfire resilience, and the many other essential services Californians depend on.

California has more billionaires than any other state, and Mr. Newsom has long said that taxing their wealth would put the state at a competitive disadvantage. While he opposes a California-based wealth tax, the governor said he might feel differently about an approach that was national in scope. “It’s one thing to have a prism of the nation, and you can talk about 50 states,” he said. “It’s another when you’re competing against 49 other states.”

— Governor Newsom, New York Times · Jan 2026(Jan 2026)

Why do we care if billionaires leave California? As the fourth largest economy on earth, California is uniquely propelled by the innovation and knowledge-based sectors that drive its strong jobs and economic climate. But even if you don’t care about the economy, it’s critical to know that California is highly dependent on top earners for its tax base:

This tax has not survived first contact with the billionaires. What do I mean by that? The proponents of this wealth tax first announced it as a potential ballot initiative in October 2025. When that happened, a number of very high net worth individuals took steps to leave the state of California.”

— Stanford University Professor Joshua Rauh · Oct 2026(Oct 2026)

By the numbers

30%

Nearly 30% of the billionaire tax base has departed or repositioned assets since Prop 40 was proposed—the exodus Saez and Zucman said wouldn’t happen.

-$24.7B

Stanford economists project Prop 40 will collect just $40 billion over five years—not $100 billion—and the net fiscal impact will be negative $24.7 billion.

$536B

Up to $536 billion in taxable net worth has been permanently lost through adjusted residency or asset repositioning in anticipation of the wealth tax.

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