Supporters of California’s contentious wealth tax argue it could generate tens of billions. However, Attorney General Rob Bonta is cautioning voters about the potential long-term financial fallout, which might be counterproductive.
For the wealth tax measure to make it onto the November ballot, it first needs to gather enough signatures.
Bonta explained that while the Billionaire Tax Act of 2026 may initially boost tax revenues by billions during its early years, it could also lead to a “likely” annual decline in state income tax revenue by hundreds of millions.
In the official summary of the proposed wealth tax, Bonta pointed out that it could result in ongoing decreases in income tax revenues amounting to hundreds of millions each year.
Despite these warnings, Vermont Senator Bernie Sanders, a self-described socialist, is all in on the bill and aims to propose a similar national wealth tax based on California’s initiative.
“I strongly support California’s grassroots effort to impose a 5% wealth tax on 200 millionaires worth $2 trillion,” Sanders mentioned in a post. “This is a model that should be emulated across the country, which is why I will soon introduce a national wealth tax on millionaires.”
Sanders also acknowledged California Representative Ro Khanna, who introduced the ballot measure. Khanna stirred up some controversy recently by addressing a tech billionaire’s threats to leave the state over the proposed tax.
He referenced Franklin D. Roosevelt, noting that when economic elites threatened secession, FDR joked, “We’ll be sorely missed when they’re gone.”
On the other hand, Bill Ackman, a well-known hedge fund manager, contended that while the ultra-wealthy might be dodging taxes, a wealth tax itself is not the solution.
“It would be devastating for California,” Ackman argued. “All the successful founders and entrepreneurs are leaving. Literally, no one is staying.”
Instead, he suggested fixing a tax loophole that allows the wealthy to borrow against stock gains without paying taxes. “You can live an extravagant life without contributing fairly, and that’s not just,” he remarked.
Ackman proposed taxing these loans similarly to selling stock. At least one other billionaire shared similar views.
His concerns seem to have merit as reports indicate that some billionaires are actively considering moving out of California.
For instance, PayPal co-founder Peter Thiel is setting up a new office in Miami, frustrated by the impending 5% wealth tax that could impose a staggering $1.2 billion liability on him.
Additionally, Alex Spiro, representing Tesla CEO Elon Musk, registered his discontent and urged Governor Gavin Newsom—who is against the tax—to put an end to it.
Spiro warned that the billionaire tax could prompt a significant loss of investment and innovation in California.
“Our clients have made it clear that they intend to permanently relocate if this tax is imposed,” Spiro disclosed on behalf of an unnamed billionaire client.
The wealth tax initiative, backed by the labor union SEIU-United Healthcare Workers West, requires around 870,000 signatures to qualify for the ballot in November 2026.
