Stanford economists project long-term loss from California billionaire tax
A new model puts proceeds from the proposed one-time levy at $28 billion to $36 billion, while warning that lost income taxes could outweigh the revenue if wealthy residents leave.
California's proposed billionaire tax could raise $28 billion to $36 billion yet leave the state worse off over time if wealthy residents depart, according to a Stanford economists' working-paper estimate reported by Business Insider on October 22. The forecast puts a fiscal risk before voters ahead of the November 3 vote on Proposition 40.
How the Stanford economists calculated the risk
Benjamin Jaros and Joshua Rauh estimate proceeds well below supporters' roughly $100 billion projection, Business Insider reported. Their model projects an average net loss of $38.9 billion if departures and lost state income-tax payments persist. Losses exceeded revenue in 85% of the 100,000 simulations the economists ran.
The proposed measure would impose a one-time 5% tax on people who were California billionaires and state residents on January 1, 2026, valuing their wealth at year-end. Most proceeds would go toward healthcare. The researchers' revenue estimate accounts for reported moves before the residency cutoff and assumes legal challenges could prevent collection of some remaining tax.
Business Insider reported that the researchers identified seven billionaires said to have left before the cutoff, whose combined wealth represented nearly 30% of the wealth they considered potentially taxable. A move alone does not settle a person's tax residency, the researchers cautioned. Whether those people remain away and cease paying California income tax is central to the projected longer-term loss.
California's state analysts offer a less stark estimate
California's nonpartisan Legislative Analyst's Office expects the tax to generate tens of billions of dollars and estimates a possible ongoing reduction of less than $1 billion a year in billionaire income-tax payments, according to Business Insider. That contrasts with the Stanford model's assessment of the fiscal effect if departures and lost payments persist.
Meta's response to Zuckerberg's possible move
A separate corporate response shows how the proposed tax is affecting decisions before the vote. CBS News reported that a Meta regulatory filing said chief executive Mark Zuckerberg had been evaluating a move of his primary residence outside California if voters approve the levy. Meta described the prospect as raising questions for management because a relocation would be public and noticed by employees.
Meta's board approved a new class of nonvoting shares that could allow Zuckerberg to raise money for the tax without selling voting shares and reducing his control, CBS News reported. The company said the shares, due to become effective in January, would also help it raise capital for AI infrastructure and other corporate purposes. Following the board's decision, Zuckerberg told Meta he would commit to remaining a California resident for eight years, according to CBS News.
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Sources and context
- Billionaires fleeing California's wealth tax could cost the state more than the levy makes, Stanford economists sayBusiness Insider
- Mark Zuckerberg threatened to leave California over proposed billionaire tax, Meta saysCBS News; report says The Associated Press contributed
AI-assisted article checked against the listed sources. NewsJaws did not conduct interviews or attend the reported events.