California's billionaire tax vote: two economists, one measure, a $139 billion gap in their conclusions

California voters go to the polls Tuesday on Proposition 40, a one-time 5% tax on the net worth of the state's roughly 200 to 250 billionaires, with 90% of proceeds earmarked for healthcare. The measure has produced something unusual even by the standards of ballot-initiative warfare: two credible, peer-reviewed economic analyses that disagree not by a rounding error but by roughly $139 billion.

On one side, Gabriel Zucman — a UC Berkeley economist who helped develop the proposition — projects it raises about $100 billion. On the other, Stanford economists Benjamin Jaros and Joshua Rauh, in a working paper published by the National Bureau of Economic Research, estimate the tax would net the state roughly $30 billion upfront and ultimately leave it about $39 billion worse off in present-value terms than if the measure had never passed.

The stakes are not abstract. Congress's 'One Big Beautiful Bill' has cut Medicaid funding, and Zucman argues that without new revenue, roughly two million Californians will lose health insurance, pushing the state's uninsured rate from 6% to 10%. Representative Ro Khanna, a Democrat representing California's 17th congressional district, has written that the tax would help keep 3 million Californians from losing coverage. Governor Gavin Newsom, however, has endorsed Proposition 42 — a measure funded by Google co-founder Sergey Brin that would cancel the tax and bar new state taxes on personal property — putting him at odds with his own party's base.

The core of Zucman's case rests on a striking comparison: California's roughly 250 billionaires hold about $2.3 trillion in total wealth — equal, he says, to the total adjusted gross income of all California families combined. Because the wealthiest Californians can legally arrange their affairs to generate little or no taxable income — he cites Larry Page and Sergey Brin paying essentially no California income tax in 2019, 2022, and 2023 by not drawing salaries, paying dividends, or selling shares — a wealth tax is, in his framing, the only instrument that actually reaches them.

The current tax system fails at taxing billionaires. This is true in California. This is true in the U.S. more broadly. This is all over the world. And the reason is that when you're extremely rich, it's very easy to organize your wealth such that this wealth will generate no or very little taxable income.— Gabriel Zucman, UC Berkeley economist

Zucman also points to the measure's design as a migration deterrent: because eligibility is based on California residency as of January 1, 2026, he argues there is no longer any financial incentive to leave. 'One cannot avoid the tax by moving,' he has said. 'This is one of the main reasons why it was structured as a one-time tax.'

Jaros and Rauh reject that logic on two grounds. First, they document that seven billionaires — including Peter Thiel and Google co-founders Larry Page and Sergey Brin — have already publicly left California, removing approximately $540 billion, or 30% of the state's total billionaire wealth, from the potential tax base. They believe additional billionaires have quietly departed. Second, they argue that what matters is not what the measure says about 2026 but what billionaires expect California to do in the future: because the legislature could reimpose a wealth tax with a two-thirds vote, some may price in that risk even if Prop 40 fails.

When is Elon Musk moving back? When is Peter Thiel moving back? When is Larry Ellison moving back? I need to hear the plausible story. I'm waiting for it.— Benjamin Jaros, Stanford/Hoover Institution economist

The Stanford paper projects that after departures, the state would collect roughly $30 billion — within a range of $28 billion to $36 billion — from the tax itself. But the ongoing income-tax losses from a smaller billionaire population would run $1 billion to $3.5 billion per year. If those losses persist, their present value exceeds the wealth-tax proceeds by about $39 billion, the authors calculate. Their paper also introduces a 'litigation risk framework' that simulates 100,000 possible legal outcomes, since portions of the tax face court challenges; realized revenue could range from zero, if courts strike down the whole measure, to $72 billion if the state prevails in every case against every taxpayer who did not leave early.

These findings suggest that the Billionaire Tax Act will not fulfill the primary functions for which it was designed. Although the Act was designed to raise revenue, behavioral response prior to voting has eroded most of the projected tax base.— Benjamin Jaros and Joshua Rauh

Supporters of the measure have pushed back on the Stanford methodology at a fundamental level. A separate expert report by economists including Emmanuel Saez and David Gamage also puts the revenue at $100 billion. Their central objection: the Jaros-Rauh model weighs a one-time wealth tax against income-tax losses that run in perpetuity — an asymmetric comparison. Jaros concedes the point in part, but says the measure was written as a one-time levy and must be scored as written. He called the $100 billion estimate 'magic money.'

The critics of the Stanford paper also include some of the most decorated names in economics. A September letter of support for Prop 40 was signed by Nobel laureates Daron Acemoglu of MIT and Joseph Stiglitz of Columbia University, who noted that California has attracted more venture funding since the wealth tax was announced.

What will allow California to thrive in the future is not letting a handful of billionaires live tax free: it is adequate public spending on health, education and public infrastructure, key engines of economic growth to which it is only fair to ask the ultra-wealthy to contribute.— Daron Acemoglu, Joseph Stiglitz, and co-signers

The Service Employees International Union-United Healthcare Workers West, which sponsored the initiative, dismissed the Stanford findings as a 'misinformation campaign.' The union's leader, Dave Regan, told CBS News he is 'pretty confident' the tax will pass, calling the situation 'an emergency.' The nonpartisan Legislative Analyst's Office occupies a middle ground: it expects a temporary gain of tens of billions of dollars, offset by a possible ongoing income-tax decline of less than $1 billion a year, but declines to publish a net figure — a posture Jaros described as 'sufficiently informative and yet vague at the same time.'

A UC Berkeley Citrin Center–Politico poll published the week of the vote found 46% of likely voters in favor of Proposition 40 and 43% opposed — a tighter margin than the 50% support among registered voters measured in February. The measure launched publicly at a February 18 event in Los Angeles featuring Senator Bernie Sanders, who campaigned for it as an emergency tax to protect the state's healthcare system.

Why it matters — California's Prop 40 is the first measure of its kind to reach a state ballot in the US, and its outcome — and the economic reality that follows — will shape whether other states and the federal government pursue wealth taxes on the superrich.

Sources differ on Total revenue Prop 40 would raise: ~$100 billion (kqed.org / cbsnews.com (Zucman, Saez, Gamage, Khanna)) vs ~$30 billion upfront; net loss of ~$39 billion in present value (cbsnews.com / investmentnews.com / sfstandard.com (Jaros and Rauh, NBER)) vs 'Tens of billions' temporarily, offset by under $1B/year in income-tax losses; no net figure given (investmentnews.com (California LAO))

Reported by sfchronicle.com, sfstandard.com, taxobservatory.world, nytimes.com, investmentnews.com, cbsnews.com, kqed.org