The Journal. - California Billionaires Are Freaking Out Over a New Tax Proposal

Episode Date: February 12, 2026

An influential California labor union is gathering signatures for a proposed asset tax on billionaires. But some of California’s ultra-wealthy are threatening to pack their bags — leaving the state’s tax revenue in the balance. WSJ’s Laura J. Nelson explains what’s potentially at stake and why a billionaire exodus is harder than simply renting a truck. Jessica Mendoza hosts.   Further Listening: - The Healthcare Costs of Trump’s Big Beautiful Bill  - Kathy Hochul on Mamdani, Trump and Where Democrats Went Wrong Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Our colleague Laura Nelson covers all things California. And late last year, she came across something that could revolutionize the way money flows through the state, a proposal to tax billionaires. So I spotted this billionaire tax proposal the day that it was sent to state officials. It was actually my fourth day at the journal. I just started working here. And I flacked it to my editors like, hey. Way to get you hit the ground running. Yeah, thank you to these people for giving me something interesting to do in my first couple of months on the job.

California is known for its high taxes, but this one was different. It would impose a one-time 5% tax on the assets of people who have net worths of more than a billion dollars. At first, Laura thought, this is interesting, but it might not get very far. Taxing the wealthy is an idea of popular and progressive circles, but hasn't gained a lot of traction as policy. So we just decided we would do a first story and introduce people to the idea and then we thought maybe that would be the end of it for a while. That was obviously not the case. This specifically kind of took root with the billionaire class and the hyper wealthy in the Bay Area tech scene and it caught fire from there. In California, a proposed ballot measure that would

tax the wealthiest people in that state sparked some pretty intense backlash. California's ultra wealthy railed at the idea. Anyone who has assets over a billion dollars, net of their debt, has to pay a one-time tax of 5% of their net work, including their private stock, including their real estate. You said 5%. While the proposal's advocates insisted it was necessary. Supporters say the emergency billionaire tax will prevent a statewide health care collapse.

How would you describe what's at stake? in this billionaire tax debate. How California specifically will address and work with or work against its wealthiest residents moving forward. One of the things that we've heard kind of coming up as this debate has become more public is the idea that maybe California doesn't really want it's hyper wealthy, it's billionaires to be here anymore.

And so I think there's something about the relationship between billionaires and the state that is kind of hanging in the balance. Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Thursday, February 12th. Coming up on the show, the proposed tax that's infuriating California's wealthiest. The idea to tax billionaires' assets in California was proposed by an influential

health care workers' union. It was introduced to try and solve a big problem, how to fund the state's Medicaid budget. Medicaid, which provides health. health insurance for low-income Americans is set to see huge cuts as a result of President Trump's one big beautiful bill, which passed in the summer. The union estimates that California's Medicaid funding could lose about $100 billion. Billion with a B, and that is a hole in the budget that is so large that filling it

is very challenging, right? The state of California is looking at losing $100 billion in health care funding for the next five years. Here's union chief of staff, Suzanne Jimenez, talking to a news station in Sacramento. And if we don't do anything right now, we are going to see our hospitals close, we're going to see ER's close. And so that's really what this billionaire tax is about. And that is the argument that this health care union is making, that sponsoring the billionaire

tax, is that in order to find that kind of money to backfill this cut, you have to look for a new source of revenue that brings in money that previously, you know, the state had not been tapping. Why turn to billionaires specifically? I think the union has argued that billionaires are, they have the money. I mean, and just to put it really bluntly, they have the money, right? Like in a way that like middle class people who are feeling more and more squeezed as we look at inflation and what some people have described as a cost of living crisis, it is really hard to talk about raising taxes on middle class Americans.

But their argument is that the billionaires can afford it. Just to take a step back, you talked about people being reluctant to tax the middle class. What is the cost of living situation in California right now? So California is an expensive place to live. I think as people generally know, rent is high here, the cost of gasoline is high here, everything is expensive here. But the disparity in terms of the richest and the poorest residents of California is really stark. The poverty rate here adjusted for.

for both living costs and government benefits is tied for Louisiana for the highest in the country. So it is difficult to be poor here. The proposed tax would apply to people who live in California and have a net worth above $1 billion. The union estimates there are about 200 people in the state who fall in that category. So how would this billionaire tax actually work? The way that this tax would work, I mean, structurally it's very different from the way that taxation has worked in the United States. which is that when something changes hands, then you pay taxes. So that could be, you know, if your salary, the government takes a cut when it lands in your bank

account, that could be when you sell an asset like a share of stock or a house or a painting. If you make a profit, the government gets a cut of that. So that's how taxes typically work. In California, residents, including billionaires, mostly pay taxes on their annual income or realize capital gains. But for the ultra-wealthy, much of their net worth is often tied up in asking. assets, and those are not taxable. That could change if this proposed tax takes effect. So that would mean tax collectors beginning something new, which is to take a look at the assets

that people own and value them and then impose a tax on the value of those assets. So that could include stocks, that could include artwork, that could include intellectual property rights, that could be voting rights in a company that you started or helped to start. And the tax would apply to people who lived in California as of January of this year. The proposal does raise some thorny questions. Like, how would auditors determine the value of an asset? So with a public share of stock, you at least know, if you have a share of Starbucks, you know how much it trades for on the market, right?

But if you hold a share of a company that's privately held that has not had an initial public offering, how do you value that, right? How do you value something that hasn't changed hands that you just own? And that's all really untested territory. And the proposal still has to make it onto California's ballot in November. For that to happen, the union has to collect a lot of signatures. If you have ever been in California and you've been asked to sign a petition outside a grocery store or like the farmer's market or your kids' soccer practice, you are probably,

probably participating in the state's ballot measure process. So every campaign has to collect a certain number of signatures to get their measure in front of voters. And it's pegged to the number of people who voted in the last gubernatorial election. This year, it's about 875,000 valid voter signatures. And even if the proposal makes it on the ballot, a majority of Californians have to vote yes for it to take effect. The billionaires are obviously thrilled about all of this, right? This is great. They're excited.

Yeah, no problem. Nobody's had any issues with any of it. It runs the gamut, right? So I've spent a lot of time over the last couple of weeks talking to billionaires and to people who work with billionaires and who know them. And there is like a broad spectrum of public opinion on this. Jensen Wong, who runs Navidia, basically said like, we choose to live in California. If California wants to do this, then like California can do that. And there is like a segment of people who are very much in. that category, right? Then there's a group of people who are very upset. Coming up next, the billionaires strike back. When times are tough, I turn to my group chats for advice and support. As it turns out, the ultra-wealthy aren't that different. And as the proposed California billionaire tax was gaining steam, the billionaires themselves were texting away. It happened on a signal chat called Save California. Our colleagues discovered it when it was active

earlier in the year. The chat included dozens of tech and Silicon Valley elites, including David Sachs, who is a venture capitalist and the AI and Cryptos are for the Trump administration, and Chris Larson,

the co-founder of Ripple, who is a big Democrat, so on opposite sides of the political spectrum, and in some cases, the people participating in this chat proposed some alternatives to what this union

has been pushing, and in some cases they talked about their efforts to lessen or weaken their ties to California for tax reasons. One message to the group chat said they should aim to be, quote, pro-prosperity for all. Others blasted the proposal as, quote, communism and poorly defined. Some messages warned that it would lead to tech founders pulling up their companies and getting out of the state. But leaving California takes more than just a moving truck. A person leaving the state would have to prove that California is no longer their place of residency. And that can be complicated.

There are 19 factors that the state uses. 19. Yes, 19. To determine whether someone lives here or somewhere else. And it's kind of subjective. I asked Laura to list some of those factors, from memory. Do you have real estate in multiple states? And if you do, how big are the houses and how big are the houses and how,

expensive are they? If you have artwork, where do you keep it? Where do you keep your wine collection? Where are you registered to vote? Where are you registered to drive? Did you keep your country club membership in Southern California or are you now a country club member in Florida? Did you break up with your synagogue or your church? Did you find a new one in your new state? Do you have a new veterinarian, a new dentist, a new doctor? Or do you still go to those professionals in California? Do your phone calls come from California? Toll pass records, how many times did you go through the express lanes, the list goes on and on. And so if you're the kind of person who lives your life in multiple states, to make the case that you no longer live here can be quite difficult.

Still, despite all that, some billionaires are packing up. David Sacks has said that he's moved to Texas, and Larry Page, the co-founder of Google, has engaged in some real estate transactions. So there are a couple of people who are very hyper, some of the richest people in the world who have reported that they are no longer living here or that they are trying to reduce their ties to the state, which is a big deal for the state and for its budget. That's because about one-sixth of California's tax revenue comes from the top 0.1% of earners as of 2023. And losing some of that over a potential new tax is concerning for some state leaders. So the governor, Gavin Newsom, has come out and said,

he doesn't think it's a good idea. It's a badly drafted effort. It's already had an outsized impact on this state. He doesn't support wealth taxes. He never really has. It does not support our public educators. It does not support our teachers and counselors, our librarians. It doesn't support our first responders and firefighters.

It doesn't support the general fund. In January, political strategists with ties to Newsom, launched a political action committee called Stop the Squeeze to oppose the tax. One campaign strategist said that the proposal, quote, opens up a can of worms sliding down a slippery slope by taxing cars, houses, wheelbarrows, and everything else. And what is the union behind the tax proposal said about people leaving? The union's position has been that they expect that only a very small number of people will leave or have left as a result of the proposal. We really believe that the benefit from this tax is going to outweigh, you know, maybe a couple people moving out of the state because we're really heading towards a health care crisis where we are going to see billions of dollars cut from our health care system.

Legislative analysts in California have suggested that the number of people leaving over the tax or the specter of the tax could result in losing quite a bit of revenue over the long term. But it's all speculative. So one of the many interesting things about, this discussion is we aren't really sure exactly how it will shake out. It's going to take a number of years before we really know. What is the story ultimately about? Is it a story of a state responding to a federal policy that's affecting its residents? Is it more about a growing movement against the ultra wealthy? Is it something else, all of those things? I think it's a story about what is the state's relationship to its wealthiest residence. what do they owe the state and what does the state owe them? And these are people that pretty much everybody has an opinion on.

The hyper wealthy people are interested in them. They're interested in their companies. They're interested in their contributions. They're interested in what they see as them not paying their fair share. All of these things are like fully up for public discourse. And in this like era when there's been a lot of discourse about whether the ultra-wealthy are paying their fair share or what they're contributing or whether they're not contributing enough. It's like a real sore spot and this measure is bringing this debate to the fore.

It's really like pressing your thumb on the really soft, painful societal issues that don't have like good answers. And everybody is feeling, I think, a little bit bruised. That's all for today, Thursday, February 12th. The Journal is a co-production of Spotify and the Wall Street Journal. Additional reporting in this episode by Emily Glazer and Juliet Chum. Thanks for listening. See you tomorrow.