California Democrats decided to solve their budget crisis the old-fashioned way: threaten to confiscate 5% of every billionaire’s net worth in a one-time wealth tax. The billionaires responded by doing exactly what every sentient human being predicted they would do. They moved.
Bravo, Sacramento. Really nailed that one.
Six billionaires bailed before the January 1st deadline written into the ballot measure. Google cofounders Larry Page and Sergey Brin — who between them held about a quarter of all billionaire wealth in California — bought places in Miami. Peter Thiel went even further, he moved his businesses out of state and then bought a house in Florida. Even uber-liberal Travis Kalanick, the cofounder of Uber, bolted to Austin on December 18th. Steven Spielberg became a New Yorker on New Year’s Day. And Don Hankey, an 82-year-old car loan king who spent his entire life in California, bought a $21 million penthouse in Las Vegas and said he “felt a little bit like he wasn’t wanted.”
(An 82-year-old lifelong Californian. They ran off an 82-year-old man. These people are unbelievable.)
Those six departures took $27 billion in taxable wealth out of the state. Page and Brin alone account for $25 billion. The tax was supposed to raise $100 billion. Instead, it’s already driven out more than a quarter of the projected haul before a single voter has even cast a ballot.
Spielberg’s spokesperson insists the move to the San Remo on Central Park West was “purely” about being closer to his grandchildren. Nothing whatsoever to do with the $355 million he’d owe California under the tax. Just a coincidence he changed residency on the exact day the measure would take effect. (Sure, Steven. And I moved to the buffet because I wanted to be closer to the salad bar.)
The billionaires who didn’t leave are spending $35 million to nuke the ballot measure from orbit. Brin, who already fled, donated $20 million to a group that’s paying people $15 apiece to sign counter-petitions. You have to admire the hustle. The man won’t pay California $1.25 billion in wealth taxes, but he’ll drop $20 million to make sure nobody else has to either.
Here’s where the math gets truly brutal for Sacramento. A Stanford Hoover Institution study ran over 100,000 simulations on what happens if this tax actually passes. The result? In 71% of scenarios, California ends up losing money. Not making less than projected — actually losing money. The average loss across those scenarios: $24.7 billion.
How do you lose money on a tax? Easy. The billionaires who leave don’t just take their one-time wealth tax payment with them. They take their annual income tax payments. Forever. California was collecting $3.3 to $5.8 billion per year in income taxes from these people. That revenue stream is now gone — not for one year, but permanently.
Pop quiz: What happened the last time a state tried to soak its richest residents with a targeted tax? New Jersey passed a millionaire’s tax in 2004. Within five years, the state lost $70 billion in wealth as high earners relocated to Florida, Connecticut, and Pennsylvania. New Jersey’s budget office had to revise its revenue projections downward three years running. The Garden State is still trying to recover that tax base two decades later.
California is New Jersey on steroids. Chamath Palihapitiya estimates that between $700 billion and $1 trillion in wealth will leave California before this is over. That’s not just billionaires — that’s the centimillionaires, the venture capital firms, the family offices, and every startup founder who looks at this circus and thinks, “Maybe Austin isn’t so bad.”
Even Gavin Newsom — the “hair apparent” himself — called the wealth tax “really damaging.” When a governor who’s never met a tax he didn’t like is publicly running away from a soak-the-rich scheme, the whole thing is already dead. He just doesn’t want to be the guy holding the murder weapon.
Here’s what nobody in Sacramento wants to say out loud: the wealth tax isn’t just going to fail. It’s going to cost California more than it would have raised. The six departures that already happened represent a permanent annual income tax loss of hundreds of millions of dollars. Multiply that by the 21 other billionaires who’ve told reporters they’re planning to leave, plus the Zuckerbergs and Ellisons who’ve already announced their exits. We’re looking at a state that tried to grab a $100 billion windfall and instead blew a hole in its own budget that’ll bleed for decades.
Mark my words: within two years, California will be running a special legislative session to figure out how to lure wealthy residents back. They’ll offer tax credits, incentive packages, the whole dog-and-pony show. The same politicians who told billionaires to pay their “fair share” will be on their knees begging them to come home.
The billionaires won’t be returning those calls. They’ll be too busy not paying state income tax in Miami, Austin, and Las Vegas.