California Billionaires Heading for the Hills--Just Not the California Ones

The spectacle unfolding in California is both predictable and profoundly depressing: a state once synonymous with boundless opportunity and innovation, aka the Golden State, is now watching its most productive citizens flee in droves, taking with them the very wealth that has long sustained the public purse.

For years, we have observed the steady accumulation of failures under Governor Gavin Newsom and the Democratic supermajority that controls Sacramento, some ninety Democrats to a mere thirty Republicans. High taxes, rampant crime, unchecked homelessness, waves of illegal immigration, and a housing crisis that has rendered the state all but unaffordable: these are not mere policy missteps but a sustained project of self-sabotage, transforming the California dream into something closer to a cautionary tale.

The latest folly is the proposed 2026 California Billionaire Tax: a one-time levy of five percent on the net worth of individuals exceeding one billion dollars. It remains, for now, only a proposal, yet even the threat has proved sufficient to concentrate minds wonderfully.

The top one percent of earners in California already shoulder over thirty-nine percent of the state's income taxes, a figure that ought to give any rational policymaker pause. These are the engines of revenue, the reliable payers who have been sheared year after year at the state's punishing 13.3 percent top rate.

Yet now, sensing the arrival of an asset tax that would reach into illiquid holdings and accumulated fortunes, many are departing. Entrepreneur Chamath Palihapitiya captured the scale of this flight on X:

The total wealth that has left California is now $1T. We had $2T of billionaire wealth just a few weeks ago. Now, 50% of that wealth has left - taking their income tax revenue, sales tax revenue, real estate tax revenue and all their staffs (and their salaries and income taxes) with them.

The consequences are immediate and cascading. By frightening away the golden geese, the state risks exploding its already precarious budget deficit, all before the measure has even qualified for the ballot.

Palihapitiya continued: 

California billionaires were reliable tax payers - 13.3% every year. They were the sheep you could shear forever. Now California will lose this revenue source FOREVER.

Unless the initiative is withdrawn, the exodus will continue. With no rich people left, the burden will fall, as it always does in such experiments, upon the middle class.

Nor are the departures limited to anonymous fortunes. As RedState reported, the Google co-founders Larry Page and Sergey Brin are scaling back their ties to the state as the proposed ballot initiative threatens to impose a one-time wealth tax on the state's richest residents, according to The New York Times. Their combined net worth approaches some five hundred and eighteen billion dollars, hardly trivial sums.

Even those who might be expected to cheer such measures have recoiled. LinkedIn co-founder Reid Hoffman described the wealth tax as a "horrendous idea" and counterproductive." Poorly designed taxes incentivize avoidance, capital flight, and distortions that ultimately raise less revenue," he said.

The billionaires did not become so by being foolish. They recognize a punitive and unstable regime when they see one. 

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Governor Newsom has distanced himself from the tax, yet he cannot so easily escape responsibility. He has presided over, indeed, cultivated, an environment of relentless extraction and mismanagement. This is his ship, and he has steered it straight into the rocks. The failures are his, as are so many others that have turned California from a beacon of aspiration into a warning for the rest of the nation.

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