California Wealth Tax: Zucman and Rauh Clash Over Billionaire Revenue
Two leading economists project the proposed one-time tax will either generate $100 billion or cost the state $39 billion due to residency moves and legal challenges.
By Amina Kaminski ·
Gabriel Zucman and Joshua Rauh have published conflicting analyses of Proposition 40, California's proposed one-time 5% tax on the net worth of billionaires. Zucman, a professor at UC Berkeley and the Paris School of Economics, estimates the measure could raise approximately $100 billion for the state. Rauh, a senior fellow at Stanford University's Hoover Institution, argues the tax would instead drain $39 billion from state coffers.
California voters approved Proposition 13 in 1978, a tax revolt that influenced national fiscal policy. Proposition 40 reverses that trend by creating the first state-level wealth tax. The measure applies retroactively to individuals who were California residents on January 1, 2026. Revenue would fund health care for low-income residents to offset federal Medicaid cuts.
Zucman co-authored a report with Jasper Boll and Emmanuel Saez estimating that billionaire wealth in the state reached $2.3 trillion by mid-2026. They noted that this figure equals the total annual income reported by all Californians. The analysis attributes a 144% increase in billionaire wealth between 2023 and 2025 largely to the artificial intelligence boom. Zucman argues that taxing wealth addresses the ability of the super rich to avoid income taxes by structuring finances to minimize taxable earnings.
Rauh challenges the projection that the tax will generate net revenue. He identifies seven prominent billionaires who left California before the residency cutoff date. These individuals include Larry Page, Sergey Brin, Peter Thiel, Don Hankey, Steven Spielberg, Travis Kalanick, and David Sacks. Rauh claims these departures reduce potential revenue by around $30 billion. He maintains that these figures are beyond the state's reach because the individuals have established new residencies.
Zucman disputes the premise that these seven individuals successfully terminated their tax residency. He cites legal experts who argue that ending residency requires more than a change of address. He points to Google co-founder Sergey Brin, who moved to Nevada but continues to commute to Silicon Valley. Zucman believes the retroactive design of the tax, which was announced in late October 2025, makes last-minute moves difficult to execute.
Rauh also predicts significant legal hurdles. He anticipates constitutional challenges regarding the retroactive nature of the tax and its application to global assets. He warns that the Supreme Court's conservative majority may strike down parts of the measure. Zucman counters that past wealth tax failures, such as in France, were due to loopholes for business assets. Proposition 40 taxes business holdings and uses a one-time structure to minimize evasion.
Supporters of the measure have noted that wealthy individuals have spent $333 million on groups attempting to defeat the proposition. The tax exempts certain assets but targets stocks, real estate, and other holdings. Zucman stated that if California succeeds, it will begin a broader U.S. and international movement to tax the wealthiest individuals.
The dispute centers on whether the state can effectively capture the wealth of mobile billionaires. Rauh's model assumes a high rate of successful residency transfers and legal resistance. Zucman's model assumes the tax will apply to the bulk of the $2.3 trillion in reported billionaire wealth, with a 10% reduction for avoidance. Voters will decide on the measure during the upcoming election.
