The California billionaire tax just got a cold dose of reality.
The Golden State’s proposed one-time, five percent tax on billionaires, known as Proposition 40, has drawn criticism from Republicans and Democrats alike over concerns that it could drive wealthy residents, businesses, and investment out of California. Those concerns are compounded over the state's continued influx of businesses fleeing the state, high tax rates stifling innovation, and the continued rising costs of living.
But now, a new working paper from the National Bureau of Economic Research (NBER) adds data to the debate, giving critics more than rhetorical warnings to back up their concerns about taxing California’s wealthiest residents.
California's Billionaire Tax Act would collect roughly $30 billion. Accounting for lost income taxes from departures, the mean Net Present Value is negative $39 billion, from Benjamin Jaros and Joshua Rauh https://t.co/hoS1OYeXvK https://t.co/TPD4wKMppL
— NBER (@nberpubs) October 19, 2026
Rather than delivering the $100 billion windfall its proponents have promised, California’s proposed billionaire tax could leave the state with a long-term net loss of $38.9 billion, according to a new NBER working paper by Stanford researchers Benjamin Jaros and Joshua Rauh.
Jaros and Rauh estimate that the tax would generate roughly $30 billion in one-time revenue, substantially less than its supporters project. One major reason is that the pool of billionaire wealth available to tax has already shrunk. Publicly confirmed departures have removed nearly 30 percent of the potential tax base, including wealth held by Google co-founders Larry Page and Sergey Brin and venture capitalist Peter Thiel. Those departures challenge the argument that the measure’s January 1, 2026, residency cutoff would prevent wealthy residents from avoiding it.
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The larger concern is the recurring revenue California could lose. The authors estimate that the state’s billionaires collectively pay between $3.3 billion and $5.8 billion annually in state income taxes, with departures linked to the proposed wealth tax projected to cost roughly $1 billion to $3.5 billion a year. If those losses persist permanently, their present value could more than outweigh the one-time proceeds. Under the authors’ central estimate, the result would be a long-term net revenue loss of $38.9 billion, leaving Sacramento with a lasting budget hole after the initial windfall is spent.
As a matter of fact, most of their modeled scenarios explored in the working paper produce a net loss. Across 100,000 simulations using different revenue estimates and discount rates, 85 percent yield a negative net present value for California.
This is progressive economics: Package resentment of the rich into a populist policy, discount the relevant economic factors, the incentives, and anything beyond the immediate intention, then call it a net benefit to working people. Incentives matter. Results matter. Intentions, more often than not, count for little when the consequences arrive. Yet governing by intentions rather than outcomes remains the preferred approach for far too many in government.
For decades, California Democrats have relied on a booming tech sector to cushion the consequences of Sacramento’s economic policies. But the prosperity keeping the state afloat is not inexhaustible, and neither is the patience of those generating it. If the billionaire tax passes next month, Atlas may finally shrug.
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