The California Confiscation tax, which is slated to be on the ballot this coming November, has gained the support of the California Democrat party.
This past June, the “billionaire tax” earned sufficient signatures to move the issue to a ballot vote, evading the state legislature. As it stands today, California residents as of January 1, 2026, with a net worth over $1 billion will be assessed a 5% tax on all of their assets, including unrealized gains.
The proponents predict the measure will generate an additional $100 billion in revenue for a state that has been running a deficit while dealing with allegations of severe fraud regarding government expenditures. The measure has gained the support of left-wing politicians and unions who believe tax revenue is needed to fund the state’s floundering health care system.
Opponents see a measure that will undermine the most productive members of the economy, the entrepreneurial ecosystem that is largely based in the Bay Area, which fuels much of the state’s tax revenue today (~40%), by generating wealth and job creation.
WSJ.com reports that the proposal was approved by the Democrat Party this past weekend during a meeting of government officials. Ironically, the top state official, Governor Gavin Newsom, opposes that bill.
The controversial policy has already chased out billions of dollars in wealth, with estimates pegging the total at up to $1 trillion.
In March, the Hoover Institution reported that nearly 30% of the tax’s targets had already fled the state. The report anticipates that the tax may raise up to $40 billion over 5 years, falling far short of the $100 billion goal, but even worse, the permanent loss of this wealth is predicted to mean that, over time, the net effect of the tax will be negative for the state of California.
While the tax targets billionaires today, the proposal opens the door for taxes on those less affluent as reality hits and revenue targets inevitably fall short.
Investor Jason Calcanis, an Independent who has supported Democrats in the past, declared the confiscation tax will drop to targeting those worth $25 million in under 18 months, then followed by a further decline to $10 million and then finally $3 million.
What many supporters of the tax do not understand is that California has created a unique and powerful innovation ecosystem that creates jobs and wealth for the masses. Today, successful startups can quickly jump to valuations in the billions with founders seeing their net worth rise dramatically in a short amount of time. If these individuals who are worth over $1 billion on paper are compelled to pay a confiscation tax, they would need to sell shares, perhaps undermining the goals of the firm and founder control. This aspirational group of individuals will now be inclined to exit the state and move to more welcoming jurisdictions like Texas, Florida, and Tennessee. It is interesting to note that none of these states have an income tax, and Florida is seeking to eliminate its property tax for residents, as the state currently has a budget surplus.
Other opponents of the tax policy point to the incompetent state government, which has been beleaguered by allegations of fraud, leaving many to ask why the state should get more money when it is so inept with what it already generates from the public.
Beyond the threat to the California economy and its residents, there is a broader concern: if Democrats gain stronger control of Congress, a federal wealth tax, including a tax on unrealized gains, could be pursued with profoundly damaging economic consequences.
The California confiscation tax is a test of whether state policymakers understand what made it prosperous in the first place. The evidence so far, with wealth fleeing the state and more considering alternatives, suggests the answer is not very encouraging.