California Billionaire Tax: NBER Working Paper Estimates Net Fiscal Present Value at Negative $38.9 Billion

In 2026, the US state of California enacted a one-time wealth tax targeting billionaires: a 5% levy on the worldwide net worth of individuals exceeding $1 billion. In an NBER working paper, Benjamin Jaros and Joshua Rauh estimate that once billionaire migration behavior is accounted for, the tax not only fails to generate net revenue but reduces California's fiscal net present value by approximately $38.9 billion.

The paper's mechanism runs as follows: the wealth tax is levied → some billionaires depart California → the state income tax they previously paid disappears → the present value of that lost income tax exceeds the one-time wealth tax collection. Using data from the Forbes Billionaire List, news reports on California billionaires' residential real estate holdings, and public announcements of departures from the state, the authors estimate the Act will collect roughly $30 billion (range $28–36 billion), less than a third of the $100 billion projected by Galle et al. (2025).

More critical is the income-tax side. The authors estimate California's billionaires contribute $3.3–5.8 billion annually in state income taxes. Publicly confirmed migration has already eliminated nearly 30% of the Act's wealth-tax base. Discounting the permanently lost future income tax from departing billionaires, the total present value exceeds the one-time wealth-tax revenue, yielding a net present value of negative $38.9 billion. Across 100,000 simulated combinations of revenue estimates and discount rates, 85% of plausible outcomes produce a negative net present value.