A proposed "billionaire's tax" in California has captured the attention of wealthy Americans nationwide, transforming a once theoretical policy debate into a concrete threat for the state's richest residents.
The measure, which would levy a one-time 5% tax on the net worth of California residents worth $1 billion or more, has reopened familiar conversations between advisors and clients about state taxes, residency and wealth planning.
Advisors say those conversations fall into two major categories — one concerned with the potential impact of California's current proposal and another about the long-term implications of these kinds of laws.
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A controversial proposal with far-reaching effects
Advisors say they're generally skeptical that the measure will be enacted. Organizers began collecting the roughly 875,000 valid signatures needed to qualify for the November 2026 ballot last month, but the proposal faces stiff opposition from prominent business leaders and California Gov. Gavin Newsom. Even if it makes the ballot and wins voter approval, additional hurdles would remain.
"If it does get enough votes to be on the November ballot and then it is approved by a majority of voters, I think you could then expect legal challenges to it," said Sam Petrucci, head of advice, planning and fiduciary services at New York-based Neuberger Berman Private Wealth.
Dave Jones, director of estate strategy at Bailard in Foster City, California, said he also expects the measure to face legal challenges should it become law. For Jones, who has advised wealthy clients in California for roughly a decade, the proposed wealth tax isn't as novel as it first seems.
"This isn't the first time we've had a proposed wealth tax in California," Jones said. "Over the past five or six years, this is the third one, and they're all structured differently. This is unique in the sense that it's a one-time tax to fill a funding gap. It's unique in the sense that it's solely on billionaires. … [But] nothing has actually been successful yet."
The proposal, if passed, would only impact around 200 billionaires living in the state, but advisors say ultrarich clients who fall short of that threshold are asking: "Am I next?"
"There's kind of this ripple effect of this wealth tax, where the aim is at billionaires, but you have a lot of centimillionaires, a lot of ultrahigh net worth that think, well, are they next for this kind of a tax?" Jones said. "And so I think a lot of founders, a lot of executives, are thinking about their long-term plans in California."
About six billionaires left California before the new year, with more than a dozen others ready to follow their lead in response to the proposed wealth tax, Bloomberg News reported.
Despite these high-profile exits, the "wealth flight" narrative competes with a paradoxical reality: California is still minting millionaires at a record pace.
Los Angeles and the Bay Area rank as the second- and third-wealthiest cities in the country, together boasting nearly 1,300 centimillionaires and 127 billionaires in 2024, according to an analysis by
Still, some advisors suggest that a wealth tax, which would target one's overall net worth, is harder to stomach than more common income taxes.
For advisors, the focus now is less on the mechanics of a single bill and more on the potential for these concepts to migrate beyond California's borders, creating a new set of considerations for the ultrawealthy.
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Beyond the Golden State
California's proposal may dominate headlines, but it isn't the only state to have explored a wealth tax.
Last year, Washington state weighed a 0.5% tax on "financial intangibles," such as stocks and bonds, for individuals with assets exceeding $50 million. And in Hawaii, Senate Bill 313 proposes a 1% annual surtax on net worth exceeding $20 million, specifically targeting assets held within the state, including real estate and business interests.
In Washington, although the proposal stalled, it reflected a growing appetite for taxing the types of wealth that traditional income taxes often miss. A study published last year by the National Bureau of Economic Research found that the total effective tax rate for the 400 wealthiest Americans was
While Hawaii's wealth tax proposal is still under consideration, it's unlikely to pass, according to John Robinson, the founder of Financial Planning Hawaii in Honolulu.
"My guess is that this law will face stiff opposition, since the hardest hit people would be Hawaii residents who own property and businesses in the state and who report their securities portfolio realized gains, interest and dividends on their Hawaii returns," Robinson said. "While increasing sales and travel-related tax on foreign and mainland tourists and raising property tax on owners from overseas or the U.S. mainland are easy populist targets, placing the highest burden on our own state's business owners, farmers and landowners will not sit well. My guess is that this bill has no shot at becoming law."
Beyond any single proposal, the real concern for advisors moving forward is the potential for other states to begin exploring wealth taxes in response to California's measure. As with trends in sectors like electric vehicle sales, a successful approach in California could quickly serve as a template elsewhere.
"If California established a wealth tax that withstood the legal challenges that it's going to face, then I think it could become a model for other states," Jones said.
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Planning in an era of policy uncertainty
Amid ongoing tax uncertainty, advisors are increasingly helping clients firm up long-term residency plans, often years before any proposal becomes law.
Jones frames the process as guiding clients toward "intentionality." Rather than reacting to a single bill, advisors are urging clients to think about where they want to live over the next decade.
"You never want to let the tax tail wag the dog," Jones said, adding that moves driven by family or lifestyle changes tend to hold up best with tax authorities.
