California’s proposed 2026 Billionaire Tax Act sounds simple at first glance. A 5 percent tax on billionaires to fund health care sounds easy to explain and easy to sell. The reality is far messier, far more aggressive, and far more risky than the headline suggests.
This ballot initiative is scheduled for the November 2026 election, and it is already shaping behavior across Silicon Valley and beyond. Wealthy founders, investors, and executives are not waiting to see how it turns out. Many are already making moves, and not quietly.
The proposed tax applies to anyone who was a California resident on January 1, 2026. It does not matter where they live later that year. If they qualified on that single date and their covered assets top $1 billion by December 31, 2026, the tax applies.
That retroactive hook is what has people nervous. It means planning after January 1 is often too late. A person could leave California in February and still face a massive tax bill at the end of the year.
Covered assets include businesses, stocks, art, and collectibles. Real estate is excluded, along with certain retirement accounts. That sounds generous until you realize most billionaire wealth sits in private companies and complex equity structures that are hard to value and easy to dispute.
The tax is sponsored by a chapter of the Service Employees International Union and only needs a simple majority to pass. Once approved, it becomes state law, with very little flexibility for fixes if problems appear later.
Why the 5 Percent Claim Falls Apart
Voit / Pexels / The 5% figure is technically correct, but it hides how the tax base is calculated. The real cost depends on how assets are valued, how ownership is defined, and how much control a person holds on paper.
However, the most controversial rule involves voting control in private and public companies. If a person has voting or control rights, their ownership share is presumed to be at least equal to their voting power, even if their economic stake is far smaller.
A well-known example involves Tony Xu of DoorDash. He owns about 2.6% of the company but controls more than 57% of the vote through super-voting shares. Under this rule, his tax base could be calculated using the control percentage, not the economic one.
That gap can inflate the taxable base by more than twenty times. When combined with capital gains taxes triggered by asset sales to pay the bill, the total liability could exceed the actual value of the shares.
Private company valuations introduce another complication. The proposal ignores standard discounts for illiquidity and minority stakes—discounts that exist because private shares are harder to sell and often provide limited control. Skipping these adjustments inflates paper values, even if the cash isn’t accessible.
People Are Leaving Before the Vote
Kindel / Pexels / Even before a vote, the proposed tax is influencing behavior: many tech leaders have moved or cut California ties.
Both Larry Page and Sergey Brin have moved their residences, and Peter Thiel and David Sacks have followed. These are substantive departures, involving homes, businesses, and tax contributions.
In January 2026, Chamath Palihapitiya suggested that roughly $1 trillion in wealth may have left California. While debated, the trend is unmistakable: founders worth tens or hundreds of millions are watching carefully, seeing the plan as a signal of aggressive wealth taxation.
The Legislative Analyst’s Office confirms the concern, warning the tax could cut state income revenue by hundreds of millions each year as residents relocate or shift income.
