California is considering a one-time wealth tax on billionaires: a 5% tax on the net worth of California residents with more than $1 billion in wealth. The money would be used largely for health care, with some going to education and food assistance.
Source: California Attorney General, Initiative 25-0024A1 Title and Summary
On the surface, it sounds politically easy. Billionaires are unpopular. Health care is expensive. The state needs money. So why not take a slice from the people who can most afford it?
Because the question is not whether billionaires can afford it.
The question is whether California should design tax policy that punishes the exact kind of wealth creation that made California rich in the first place.
That is why I do not think this tax is a good idea.
This is not an income tax. It is a tax on accumulated wealth.
A normal income tax applies when someone earns income. A sales tax applies when someone buys something. A property tax applies annually to property. But this proposal would tax net worth itself.
That sounds simple, but it is not. Billionaire wealth is often not cash sitting in a bank account. It is usually tied up in company stock, private businesses, venture investments, restricted shares, trusts, partnership interests, intellectual property, and other assets that can be difficult to value and even harder to sell without consequences.
A billionaire founder may be worth $10 billion on paper because they own a large share of a company. That does not mean they have $500 million in cash available to pay a 5% tax. To pay it, they may need to sell stock, borrow against assets, restructure holdings, or leave the state before future wealth is created there.
That is very different from asking a high-income person to pay tax on income they actually received.
California’s greatest tax asset is not billionaires’ bank accounts.
It is the companies they build.
The best argument against the billionaire tax is not sympathy for billionaires. It is self-interest.
California's economy has been shaped in part by an environment where companies like Google, Apple, Nvidia, Meta, Salesforce, Netflix, and countless startups could be founded, scaled, funded, and staffed. The state benefits from that ecosystem every single year.
Take Google as an example.
Alphabet, Google’s parent company, employs more than 183,000 people worldwide. The company does not publicly disclose its California headcount in annual filings, but third-party workforce estimates indicate major employee concentrations in San Francisco, Mountain View, San Jose, Sunnyvale, and Los Angeles.
Source: Alphabet, Google’s parent company, employed more than 183,000 people globally at the end of 2024, according to its annual SEC filing.
Those are not abstract jobs. Those are engineers, product managers, salespeople, recruiters, lawyers, finance professionals, designers, cybersecurity experts, facilities staff, food service workers, construction workers, and local vendors. A company like Google does not just create billionaire founders. It creates an entire tax-paying economy around it.
The employee tax revenue alone is enormous.
Let’s use a conservative illustration.
If Google has roughly 39,000 employees in major California cities, and if those employees average $200,000 in taxable compensation, that represents about:
39,000 employees × $200,000 = $7.8 billion of annual taxable employment income
California’s personal income tax system is highly progressive. At an average effective California income tax rate of 8% to 10% on that $7.8 billion of employee income, the state could collect approximately:
$624 million to $780 million per year from those employees alone
That is not a one-time windfall. That is recurring annual tax revenue.
Source: See below
And that estimate only considers direct employee income tax. It does not include local spending by employees, sales taxes, property taxes, capital gains taxes from employees who own stock, taxes paid by suppliers and contractors, income taxes from vendors serving Google, or the spillover effect of startups created by former Google employees.
This is an important part of California's economic engine.
Google also pays large amounts of corporate tax.
Alphabet is also a major corporate taxpayer. In its 2025 Form 10‑K, the company reported a worldwide income tax provision of $26.656 billion on pre-tax income of $158.826 billion, for an effective tax rate of 16.8%. Alphabet also disclosed $21.526 billion of cash income taxes paid, net of refunds, including $13.658 billion in U.S. federal income taxes and $2.919 billion in U.S. state and local income taxes.
Important caveat: Alphabet’s reported $2.919 billion in U.S. state and local income taxes was paid across multiple state and local jurisdictions, and the company does not publicly disclose how much was paid specifically to California. However, California is Alphabet’s home state - its headquarters are in Mountain View - and California imposes an 8.84% corporate income tax rate on most C corporations. So California benefits from companies like Google in multiple ways.
It taxes employees. It taxes executives. It taxes stock compensation. It taxes capital gains. It taxes corporate income allocated to California. It taxes vendors, landlords, contractors, and service businesses around the company. It benefits when employees buy homes, eat in restaurants, start companies, and invest locally.
That is the real tax base. Not one billionaire’s balance sheet. The ecosystem.
A wealth tax risks damaging the very ecosystem that funds the state.
The problem with a billionaire wealth tax is that it sends a dangerous message:
Build your company here. Hire here. Create jobs here. Generate billions in recurring tax revenue here. And then, if you succeed too much, California may come after the accumulated value of what you built.
That is a terrible message to send to founders, investors, and executives.
Supporters will argue that billionaires will not leave California over a single tax. Some will not. But tax policy does not need every billionaire to leave to become a mistake. It only needs enough of them to leave, restructure, relocate future investments, or choose to build the next company somewhere else.
If a founder is deciding whether to build in California, Texas, Florida, Nevada, Washington, or another jurisdiction, this kind of tax matters. It becomes part of the risk calculation.
And once a company is founded somewhere else, California potentially does not just lose one future billionaire’s tax bill. It may lose thousands of future employees, billions in future payroll, future corporate taxes, future stock-option gains, future vendors, and future spinoff companies.
That is the tradeoff wealth-tax supporters often ignore.
The one-time nature of the tax does not make it harmless.
Supporters may say, “It is only one time.”
That is not reassuring. In some ways, it is worse.
A one-time wealth tax creates a precedent. Once voters approve the idea that accumulated wealth can be taxed directly because the state needs money, why would anyone believe it will never happen again?
Governments rarely discover a politically popular revenue source and then permanently forget about it.
The first version is “one time.” The next version is “only in emergencies.” Then it becomes “only above a higher threshold.” Then it becomes part of the normal political toolkit.
For a founder or investor, the risk is not just the 5% tax today. The risk is that California is telling them the rules can change after the wealth has already been created.
That is exactly the kind of uncertainty that pushes mobile capital away.
California already depends heavily on high earners.
California’s tax base is already heavily reliant on high-income taxpayers. The top few percent of taxpayers pay a very large share of state income taxes. That makes the state vulnerable.
When markets boom, California collects huge tax revenue from capital gains, stock compensation, and business income. When markets fall, revenue drops. If wealthy people leave, the state loses not only their direct taxes, but also the recurring tax revenue tied to their companies, employees, and investments.
So the state’s problem is not that it taxes rich people too little. The problem is that it already relies heavily on a narrow, mobile, volatile group of taxpayers.
A wealth tax doubles down on that risk.
The better policy is to grow the base, not raid the balance sheet.
California should want more Googles, not fewer.
The state should want more founders starting companies in California, more engineers moving there, more venture capital invested there, more employees receiving stock-based compensation there, and more companies paying payroll and corporate taxes there.
That is how a state builds durable revenue.
The smarter approach is not to chase one-time wealth. It is to protect and expand the recurring tax base created by successful companies.
A one-time 5% wealth tax might raise money in the short term. But if it causes even a small number of highly productive founders, investors, or companies to shift future activity elsewhere, the long-term cost could exceed the short-term gain.
California should be asking a harder question:
Would you rather collect a one-time tax from a billionaire, or collect taxes for decades from the company, employees, suppliers, investors, and spinoff businesses that billionaire helped create?
I would rather have the second one.
The bottom line is simple.
The billionaire wealth tax is emotionally appealing. It is easy to sell. Most voters will never pay it. It targets people who are easy to resent. And the money is attached to sympathetic causes like health care and education.
But good tax policy should not be based on resentment. It should be based on incentives, sustainability, and long-term economic thinking.
Google is the perfect example. California does not benefit from Google merely because its founders became rich. California benefits because Google created tens of thousands of jobs, billions of dollars of employee income, large corporate tax payments, stock-compensation tax revenue, vendor income, real estate activity, and an entire ecosystem of innovation.
Source: California Chamber of Commerce, Trillion-Dollar Tech and Innovation Sector Key to California Economic Success (2024), reporting results from a CVL Economics study.
That is the golden goose.
A billionaire wealth tax may feel like justice. But if it teaches the next generation of founders to build somewhere else, California may win the headline and lose the future.
Additional Sources:
Workforce intelligence firm Unify estimates substantial Google employee concentrations in California locations including:
San Francisco: ~20,584 employees
Mountain View: ~7,926
San Jose: ~3,662
Sunnyvale: ~3,466
Los Angeles: ~3,189
