Prop 40 Billionaire Tax Estimate Swings From $100 Billion Gain to $39 Billion Loss

A dispute over California’s proposed billionaire wealth tax has narrowed to a $139 billion difference in projected state revenue. Economists Gabriel Zucman and Joshua Rauh have published competing analyses of Proposition 40. Zucman’s team estimates the measure would generate approximately $100 billion for the state. Rauh, a Stanford economist, calculates that the tax would instead cost California $39 billion.

The proposal imposes a one-time, 5% tax on the net worth of individuals who were California residents on January 1, 2026. Zucman, a professor at UC Berkeley, co-authored a study with Jasper Boll and Emmanuel Saez. They found that California billionaires hold $2.3 trillion in assets. Their wealth increased by 144% between 2023 and 2025, largely driven by the artificial intelligence sector. Zucman argues the tax addresses a loophole where the ultra-wealthy pay little in income taxes despite massive asset growth.

Rauh’s analysis challenges the revenue projection by accounting for resident departures. He identifies seven individuals who moved out of the state before the residency cutoff: Larry Page, Sergey Brin, Peter Thiel, Don Hankey, Steven Spielberg, Travis Kalanick, and David Sacks. Rauh claims these exits reduced potential revenue by around $30 billion. Zucman disputes this, arguing that moving to Nevada or elsewhere does not automatically end California tax residency. He cites Brin’s continued commute to Silicon Valley as evidence that the billionaire remains a California resident for tax purposes.

Legal challenges represent a secondary risk in Rauh’s model. He warns that constitutional lawsuits could strike down parts of the law. The retroactive nature of the tax, which targets wealth based on past residency, may violate due process protections. Rauh also questions the valuation of privately held companies under the new rules. Zucman acknowledges that past wealth taxes in Europe often failed due to loopholes. However, he points to Norway’s long-standing wealth tax, which has remained effective despite minor increases in resident departures.

The measure aims to fund healthcare for low-income Californians, offsetting federal Medicaid cuts. Supporters have gathered $333 million in funding from the ultra-wealthy to defeat the proposition. The tax applies to assets such as stocks, real estate, and collectibles, though publicly traded shares make valuation straightforward. The outcome of the election will determine whether California proceeds with what Zucman describes as a potential spark for a national movement on taxing the superrich.