A proposed tax targeting California’s richest residents has strong support from likely voters, but critics warn it would discourage investment and cause an exodus of high income earners and businesses from the state.
The California Billionaire Tax Act of 2026 would impose a one-time 5% tax on the net worth of individuals earning more than $1 billion, the California government said. Legislative Analyst’s Office (LAO). Covered assets include businesses, securities, art, collectibles and intellectual property.
The measure would not take into account property that someone owns in their own name (or through a revocable trust), but property held through a business he or she owns can still be included in the tax because it can increase the value of that business.
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An activist holds a sign during a “Rally to Say No to Tax Breaks for Billionaires and Corporations” in Upper Senate Park on Capitol Hill on April 10, 2025 in Washington, DC (Alex Wong/Getty Images/Getty Images)
Advocates – including SEIU-United Healthcare Workers West (SEIU-UHW) – say the measure is an emergency response to save the state’s health care system of a “collapse” due to possible federal budget cuts.
According to the LAO analysis, “90 percent of the money should be spent on health care services for the public,” while the rest would go to administrative costs, education and food assistance.
However, Michel says wealth taxes don’t work in practice, arguing that they weaken incentives to build businesses, create complicated red tape and have generated disappointing revenues in countries that have tried them.
He also says they rely on a flawed “fixed pie” view of the economy, which assumes wealth can simply be redistributed through taxes, but in reality results in slower growth and a worse outcome for everyone.
Michel says a 5% wealth tax would siphon money away from businesses, leaving owners with less to reinvest, expand and hire. (iStock / iStock)
Michel also said a wealth tax differs from an income tax because it is levied on accumulated wealth rather than annual income, and can translate into a much higher burden on entrepreneurs.
If a company earns anything less than 5% returns, every dollar of profit is taxed, he explained, translating into an income tax rate of 100% or more, leaving no incentive for an entrepreneur to grow and maintain that asset.
Michel noted that the proposal has even attracted opposition from the government. Gavin Newsom.
‘He is very aware of the fact that this proposal will actually lead to a exodus from California’s tax base” he said.
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California Governor Gavin Newsom has spoken out against the 2026 Billionaire Tax Act. (Fred Greaves/Reuters/Reuters Photos)
Michel warned that the damage would not be limited to the roughly 200 billionaires targeted by the initiative. Because most wealth is held in “productive assets” such as shares in companies, real estate and machinery, he warned the tax would punish the investments that drive the broader economy.
“We’re going to have less housing, we’re going to have less investment in machinery and equipment, we’re going to have less investment in new businesses,” Michel said. “That ultimately makes everyone worse off.”
California already has the most progressive tax system in the industrialized world, according to the American newspaper Fraser Institute.
Wealth taxes have been tried and failed around the world, he pointed out, and only a few OECD countries still use them since their peak in the 1990s. In Spain, what was presented as a temporary one-time levy eventually became a permanent tax on the wealthy. The same could happen in California, he warned.
CALIFORNIA WILL REGRET THE EXODUS OF BILLIONAIRES, WASHINGTON POST WARNS
A person holds a ‘Resist Billionaires’ sign as demonstrators demonstrate against the initiatives of Tesla CEO Elon Musk’s Department of Government Efficiency (DOGE) during a nationwide ‘Tesla Takedown’ rally outside a Tesla dealership on March 29, 2025 in Pas (Mario Tama/Getty Images)
Michel added that the mere threat of return would push high-income residents to leave the state.
The bill’s sponsors at the SEIU-United Healthcare Workers West say it’s about making billionaires pay their “fair share.”
She warned that “local hospitals and emergency rooms will close their doors forever” unless voters approve the billionaire tax so that “billionaires pay their fair share” through a “one-time emergency 5% tax.”
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SEIU members protest against ICE on Friday, January 23, 2026. (Hyoung Chang/The Denver Post/Getty Images)
She dismissed “sensational claims” from “a handful of billionaires and their highly paid advisors” that there is one exodus from California before the residency deadline of January 1, 2026. Citing “a lack of public reports or confirmations,” she says it “doesn’t appear to be true,” and that “the overwhelming majority” of about 200 billionaires “apparently chose to stay.”
Jimenez said nurses, health care workers, teachers and firefighters “pay taxes on almost every dollar they earn,” arguing that without the measure, “higher health care costs and higher taxes will be passed on to millions of Californians” who are already dealing with “skyrocketing health care and prescription costs.”
She called the debate a “useful distraction” while her union “120,000 health workersStay focused on keeping hospitals and emergency rooms open for “California’s 40 million residents.”
“While these outlandish claims provide a convenient distraction for a small number of billionaires, our union’s 120,000 healthcare workers remain focused on keeping California’s hospitals and emergency rooms open for the 40 million Californians who depend on them,” she added.
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Although the proposal is still in the signature-gathering phase to qualify for the November ballot, it has strong support from likely voters, according to new polling. A February 2026 Nestpoint survey found that 60% of likely voters support the wealth tax, even though a majority of those same respondents say it would cause an exodus of businesses and cost local jobs.
