Stanford economists: California's billionaire tax could raise $30 billion and lose $39 billion

Two Stanford economists argue that California's proposed billionaire tax would collect about $30 billion, not the $100 billion its backers project, and could leave the state worse off over time. The paper, by Benjamin Jaros and Joshua Rauh, is a National Bureau of Economic Research working paper, which means it has not been through formal peer review. CBS News reported its findings this week.

What voters are deciding

Proposition 40 is a one-time 5% tax on billionaire wealth, on the November ballot. Its sponsor, the union SEIU-UHW, says the money would shore up California's health care system and offset cuts from the federal One Big Beautiful Bill law. The union disputes the research. A Citrin-Politico poll cited by CBS found 46% of likely voters in favor and 43% opposed.

The math behind $30 billion and $39 billion

The authors start from departures. Per CBS, seven billionaires have publicly left California, including Peter Thiel, Larry Page and Sergey Brin, taking about $540 billion, roughly 30% of the state's billionaire wealth, out of reach of the tax. The paper also assumes more have moved quietly since the measure was announced. That cuts expected collections to about $30 billion.

The second step is what California loses afterward. Billionaires who leave also stop paying state income tax, which the authors put at roughly $1 billion to $3.5 billion a year. If those losses are permanent, their present value comes to about $39 billion more than the wealth tax raises. By our arithmetic, that implies lost income tax with a present value near $69 billion ($30 billion plus $39 billion). We have not read the paper's discount rate, so treat that figure as our inference, not theirs.

The authors conclude that the act "will not fulfill the primary functions for which it was designed."

What the number depends on

• The $39 billion loss needs the income tax losses to last forever. Temporary departures would shrink it.
• It also needs extra, unannounced moves beyond the seven publicly confirmed ones.
• Supporters disagree with the premise and the estimate, and economists are split on how mobile wealth is.

Why business owners should care

California leans heavily on top earners for income tax receipts, so a drop in them reaches budgets for hospitals, schools and contracts. Owners selling to the state or to health systems should watch what happens to Medi-Cal funding whichever way the vote goes. Founders with a large stake in a private company face the sharpest planning question, since wealth for a closely held firm is hard to value. Track the measure at our economy desk.

Sources: CBS News, summarizing the Jaros and Rauh NBER working paper. The $69 billion figure is our own arithmetic. This is market information, not investment advice.