The 2026 Billionaire Tax: California’s Most Dangerous Fiscal Experiment Yet

California’s lat­est high-pro­file tax (ill con­ceived) idea is a pro­posed bal­lot ini­tia­tive dubbed “The 2026 Bil­lion­aire Tax Act” (Ini­tia­tive 25–0024).

Even though it’s not law (and isn’t even guar­an­teed to qual­i­fy for the bal­lot yet), it’s already influ­enc­ing how some founders, investors, and advi­sors think about Cal­i­for­nia as it applies to their invest­ments and busi­ness­es.

It’s near­ly impos­si­ble for busi­ness lead­ers to per­form liq­uid­i­ty plan­ning, enti­ty struc­ture, and val­u­a­tion risk head­ing into spring of 2026. Here’s what to know.

What the initiative would do

If it qual­i­fies and vot­ers approve it in Novem­ber 2026, the mea­sure would impose a one-time 5% tax tied to the world­wide net worth of cer­tain peo­ple who are Cal­i­for­nia res­i­dents or part-year res­i­dents as of Jan­u­ary 1, 2026, as well as cer­tain trusts. That is, those that choose to stay, which is becom­ing a prob­lem, name­ly those with wealth are increas­ing­ly choos­ing green­er pas­tures like Texas, Ten­nessee, Neva­da, Utah, Ari­zona, Flori­da, and well.….Just about any­where oth­er than high tax and spend Cal­i­for­nia, New Jer­sey, and New York.

The hard part is valuation—especially private business equity

It’s near­ly an impos­si­ble task and adds to the tax as it requires redi­rec­tion of efforts and like­ly mas­sive account­ing bills. For bil­lion­aires whose wealth is most­ly illiq­uid (e.g., pri­vate com­pa­ny stock, LLC inter­ests, car­ried inter­ests, lay­ered hold­ing struc­tures), the most con­se­quen­tial issue is not the rate—it’s how “net worth” is deter­mined and how dis­putes will be resolved. The ini­tia­tive text and pro­fes­sion­al analy­ses flag that pri­vate busi­ness val­u­a­tion becomes a major com­pli­ance and con­tro­ver­sy dri­ver. Great if you’re some­one like me, a Cal­i­for­nia tax attor­ney, how­ev­er, for the pub­lic at large and those that don’t pull up roots and leave, a real night­mare.

Private-company rules can “pull” valuation upward

One key fea­ture dis­cussed by tax prac­ti­tion­ers: the mea­sure con­tem­plates val­u­a­tion approach­es that can be influ­enced by recent financ­ings or equi­ty sales, which can cre­ate ten­sion when a company’s last priced round is stale—or when a lat­er round is a down-round and ear­li­er val­u­a­tions were high­er. This is exact­ly the kind of inter­pre­tive gray area that tends to pro­duce audit fights and lit­i­ga­tion.

Founder control structures could matter

Anoth­er busi­ness-plan­ning con­cern: when founders hold high-vote / mul­ti-class struc­tures, the measure’s approach can treat “con­trol” as rel­e­vant in ways that may increase the pre­sumed por­tion of enter­prise val­ue attrib­ut­able to the founder, com­pared to pure eco­nom­ics. That can affect how com­pa­nies think about gov­er­nance and capitalization—especially late-stage pri­vate com­pa­nies. Con­trol and own­er­ship gen­er­al­ly great­ly over­lap, albeit when one must mea­sure to what degree and pro­duce a val­u­a­tion, it moves from a rel­a­tive objec­tive to high­ly sub­jec­tive exer­cise.

Public assets are comparatively straightforward

For pub­licly trad­ed assets, val­u­a­tion gen­er­al­ly relies on mar­ket val­ue on the rel­e­vant date—far sim­pler than pri­vate-com­pa­ny equi­ty, where appraisals, method­ol­o­gy selec­tion, and doc­u­men­ta­tion become cen­tral. And while it may make lit­i­ga­tion risk low­er, it does­n’t remove the actu­al “one time” (who in their right mind would believe once a tax is put into place it will only be one time?) cost of the tax and the down­ward pres­sure it will place on val­u­a­tions (some will have to sell for exam­ple just to pay the tax).

The “net worth” base is worldwide, with carveouts and traps

At a high lev­el, the tax base is world­wide assets minus lia­bil­i­ties, but the details mat­ter: there are exclu­sions (for exam­ple, cer­tain retire­men­t/pen­sion-relat­ed items are described as exclud­ed in pol­i­cy sum­maries), and there are anti-avoidance/“lookback” style con­cepts that can make pre-year-end plan­ning less intu­itive than “sell it before 12/31.” Or in oth­er words, it’s filled with prob­lem solu­tions that attempt to solve the under­ly­ing prob­lem.

A phase-out is built in

The mea­sure includes a phase-out so it doesn’t ful­ly apply below rough­ly $1.1 bil­lion of net worth (with the thresh­old mechan­ics described in state and pro­fes­sion­al analy­ses).

How it becomes law (and why the Governor can’t veto it)

This is a cit­i­zen ini­tia­tive statute route: pro­po­nents must col­lect enough valid sig­na­tures to reach the bal­lot, then win a statewide pop­u­lar vote. If it pass­es, it becomes law with­out the Governor’s sig­na­ture, mean­ing no veto. Much is said about how we live in a democ­ra­cy, and this is a pure democ­ra­cy action as it allows the gen­er­al vot­ing pub­lic to decide the issue. Anoth­er way to describe this method of decid­ing pub­lic pol­i­cy is mob rule. There’s a very high­ly valid rea­son our found­ing fathers reject­ed democ­ra­cy in favor of a repub­lic. A repub­lic has the fea­ture of the pub­lic hir­ing peo­ple who will become (in the­o­ry at least) high­ly famil­iar with the issue and will vote on the pro­pos­al in a posi­tion of an informed deci­sion. The pub­lic on the oth­er hand will large­ly give it lit­tle mean­ing­ful thought and most­ly just vote the way their gut tells them at the bal­lot box. Not exact­ly how we want a gov­ern­ment to run if we intend to have long-last­ing pos­i­tive pub­lic pol­i­cy that works for every­one. Addi­tion­al­ly, when peo­ple can tax “oth­ers” to pay for the gov­ern­ment ser­vices THEY want, it becomes a sit­u­a­tion where two wolves and a sheep are vot­ing on what’s for lunch. Noth­ing good can hap­pen out of it, and our found­ing fathers knew this, and warned great­ly against it.

Legal and administrative challenges are likely

Even sup­port­ers acknowl­edge the mea­sure would be com­plex to admin­is­ter; oppo­nents argue it’s unwork­able and uncon­sti­tu­tion­al. Either way, if enact­ed, you should expect lit­i­ga­tion, reg­u­la­tions, audit pro­grams, and val­u­a­tion dis­putes to fol­low quick­ly. All sorts of legal issue will arise, includ­ing Con­sti­tu­tion­al chal­lenges due to the “Tak­ings Clause” as well as oth­er legal the­o­ries that may like­ly stop the tax in its tracks.

More harm than good will certainly happen, albeit you don’t have to take my word for it

Regard­less, when busi­ness lead­ers and wealthy indi­vid­u­als look upon the tea leaves and see the envi­ron­ment is shift­ing poor­ly against them, while at the same time oth­er states are rolling out the red car­pet, it does­n’t take an eco­nom­ics degree to under­stand how the tax base could erode to the point that it will take decades of pain for the state to recov­er and become attrac­tive as a place to do busi­ness. Unless Cal­i­for­nia can attract busi­ness from oth­er states, and it con­tin­ues to lose wealth from those same oth­er states, the out­come is as easy to see as watch­ing the same movie for the third time.

• Cal­i­for­nia Leg­isla­tive Analyst’s Office (LAO): warns of trade­offs and poten­tial longer-term rev­enue effects (ie tax rev­enue will decrease, not increase) ; it also describes key mechan­ics like who pays, how the tax is cal­cu­lat­ed, and the option (as described in the analy­sis) to spread pay­ments over time with added cost.

• Big-firm / account­ing-firm analy­sis (PwC, EY, Bak­er Botts): focus heav­i­ly on val­u­a­tion mechan­ics, trust inclu­sion, and “how would you even com­pute this” com­pli­ance ques­tions.

• California’s bud­get has faced repeat­ed multi­bil­lion-dol­lar deficits, and pro­jec­tions dif­fer by fore­cast­er, but the direc­tion (ongo­ing short­falls) is a real, sourced con­cern.

• Cal­i­for­nia rev­enue is unusu­al­ly sen­si­tive to high earn­ers and cap­i­tal-gains cycles; a tax that trig­gers tax­pay­er mobil­i­ty could increase volatil­i­ty (this is a com­mon thread in main­stream report­ing about the mea­sure)

Who does­n’t see this high tax pro­pos­al as a prob­lem? Aca­d­e­m­ic analy­sis (UC Berke­ley econ­o­mists’ report): argues the tax could raise very large sums over sev­er­al years and frames it as a tar­get­ed way to fund pro­grams, how­ev­er, even those that sug­gest it will raise mon­ey (instead of the actu­al obvi­ous long-term impact) acknowl­edge design choic­es (like how real estate and busi­ness-owned real estate are treat­ed). Yes, I guess it could raise very large sums of tax rev­enue quick­ly (ie sev­er­al years), albeit unrea­son­ably dis­counts the total impact of migra­tion of wealth to oth­er states that will result in low­er tax rev­enue on a longer time scale. This should be a show stop­per and a warn­ing, with­out address­ing even the pos­si­bil­i­ty of an tax rev­enue.

Sell­ing out tomor­row for a quick fix today is the thing of addicts, and maybe, just maybe Cal­i­for­nia is exact­ly that right now. An addict with a tax addic­tion crip­pling com­mon sense and fis­cal plan­ning.