California Put A 5% Wealth Tax On Its Billionaires. Six Left Before It Even Passed.

A state-level wealth tax on a concentrated tax base can backfire because the wealthy are highly mobile and may relocate to avoid the tax, potentially causing the state to lose more revenue than it gains. California's Proposition 40, which proposed a 5% one-time wealth tax on billionaires retroactive to January 1, 2026, caused six billionaires to leave the state before the measure even qualified for the ballot, taking an estimated $27 billion in potential revenue. California's own nonpartisan Legislative Analyst's Office concluded the tax might actually lose the state money over time because the concentrated tax base of 15,000 top earners funds nearly half of the state's income tax revenue, which itself funds 70% of the state's budget.