California Billionaires Plan Exit as Wealth Tax Vote Approaches

California is bracing for a potential exodus of its billionaires as voters prepare to decide on a contentious wealth tax that could significantly impact the state’s economy. If approved in November 2026, the proposed 5% tax on the net worth of the state’s approximately 200 billionaires could lead to tax bills in the billions for prominent figures such as Mark Zuckerberg and Jensen Huang. Reports indicate that some of these ultra-wealthy individuals are already making plans to leave the state ahead of this pivotal vote.

David Lesperance, a tax advisor who works with billionaires in the venture capital and private equity sectors, revealed that his clients are actively considering strategies to safeguard their assets. “Elon Musk, Tim Cook – any of these guys, they don’t need to be in Palo Alto in order to do what they do,” Lesperance commented, highlighting that many billionaires are preparing to relocate out of California. This includes registering to vote in other states and even scheduling appointments with healthcare providers outside California.

The proposed tax is estimated to generate up to $100 billion in revenue over five years, according to supporters from the SEIU-United Healthcare Workers West. This revenue is intended to replenish healthcare funds affected by federal cuts and bolster public school financing. To qualify for the ballot, the measure must gather approximately 870,000 signatures by spring 2024, with signature collection efforts anticipated to begin in January and February.

Political opposition to the tax is evident, notably from California Governor Gavin Newsom. His spokesperson, Izzy Gardon, stated, “The governor has consistently opposed state-level wealth taxes — recognizing that if implemented at a state-only level, they drive a race to the bottom.” Despite this, there is speculation that Newsom may eventually support the measure given its backing.

In response to the proposed tax, a committee named Stop the Squeeze has already raised $100,000 from billionaire venture capitalist Ron Conway to fund its opposition efforts. Additionally, attorney Kurt Oneto has filed paperwork aiming to introduce a constitutional amendment that would clarify residency rules for California residents, potentially complicating the implementation of the wealth tax.

Garry Tan, CEO of the tech startup accelerator Y Combinator, expressed concerns that the tax could drive entrepreneurs away from California. “While this tax wouldn’t impact me personally, I oppose it because California should be focused on keeping entrepreneurs and investors here,” Tan stated. He added that the proposed measure could lead to a “stampede of unicorns” relocating to states like Texas, Florida, and Nevada, which are perceived as more tax-friendly.

Lesperance described the current environment for billionaires in California as a “political wildfire zone,” emphasizing the urgency for his clients to act before the situation deteriorates. He noted that many wealthy individuals are already taking steps to minimize their tax burdens by considering relocation options.

As the vote approaches, the implications of the wealth tax extend far beyond California’s borders. The potential loss of high-profile residents could have lasting effects on the state’s economy and innovation landscape. The outcome of this measure will not only shape the financial future of California but also influence the decisions of billionaires across the nation as they navigate the complexities of wealth taxation.