This November, California voters will decide on Proposition 40. If passed, it will levy a one-time 5 percent tax on the state’s billionaires. Berkeley Law Professor Brian Galle, writer of a recent report titled “How to Tax the Ultrarich,” is one of four coauthors of the proposition. He kindly agreed to field our questions.
This interview has been edited for length and clarity.
Where did the idea for the state billionaire tax come from?
It comes from California Health Workers West, a union of health workers in California. They are concerned about the 2025 legislation [Trump’s One Big Beautiful Bill Act], which is projected to cut about $100 billion in federal support for California health costs over the next five or six years. Typically, hospitals cannot turn away people who show up at their emergency room sick or seriously injured. That money has to come from somewhere. So it comes out of the pockets of other Californians who already have health insurance, or it comes through staffing cuts by hospitals. So the $100 billion in cuts probably means less access to care for Californians, care that’s not as good, and care that’s more expensive.
The union didn’t think any of this was good, so they said, “Where can we get this $100 billion?” And it turns out California has 200 billionaires who collectively are worth more than $2 trillion. If the bill passes, and they pay this one-time 5 percent tax, they’ll still be richer at the end of the year than when they started. That seems like a more sensible way to get the money than out of the pockets of every insured Californian.
Why is it only a one-time tax?
Because there’s a one-time problem. This cut in federal support will last for as long as this administration is around, and probably for some time after, so we should expect at least three years of California really needing that money.
Critics have pointed to France as an example where wealth taxes triggered “capital flight”—wealthy people moving to lower tax regions, which ultimately hurts the economy. Is that a concern here?
Those critics are wrong about the evidence. I’ve written a paper examining the effects of both wealth taxes and income taxes on wealthy people around the world, and there is very little real mobility. People don’t really move in response to taxes. Our lives and business are very closely tied to a place, and it’s usually not worth giving up those connections.
If the bill passes, and they pay this one-time 5 percent tax, they’ll still be richer at the end of the year than when they started.
I would agree about France in the following sense: The French wealth tax, as it was implemented, only taxed publicly traded businesses. And if you only tax a subset of businesses, you’re going to have a lot of pressure over time for people to move their money into the kinds of businesses that aren’t being taxed. That turns out to be bad for your economy, and it makes people mad that some people are being taxed and other very similar people aren’t. Our wealth tax instead taxes everyone the same way.
If you look at the right models, wealth taxes can be successful. Switzerland raises more money through its wealth tax than through any other mechanism. Spain has a wealth tax at the state level. There are wealth taxes in Scandinavia, too. The California wealth tax uses those successful wealth taxes as models.
You and your coauthors have estimated the tax would raise about $100 billion over five years. Some economists predict much less. How did you come to your estimation?
The estimate starts with the fact that California billionaires are worth somewhere upwards of $2.2 trillion, and growing. Five percent of that is $110 billion. We expect that the tax will fall on most of that existing money.
The tax falls on individuals who lived in California as of January 1, 2026, which already happened—and it happened before [Google cofounder] Sergey Brin claimed that he had moved. The fact that individuals are claiming that they will move in the future doesn’t change the amount of revenue that is going to be brought in now.
Another argument is, “Well, some of the billionaires might move permanently, so the net revenue that the bill brings in is less than the income tax that we would have gotten from those billionaires in the future.” But our income tax system has so many loopholes that even if billionaires did leave, we wouldn’t be losing very much, because they don’t pay very much income tax to begin with.
Many billionaires live by the so-called “buy, borrow, die” strategy. What is that and how does your tax address it?
Under an income tax, an investor only pays tax when they sell. And dying is not the same as selling. So, if you pass assets to your heirs and you haven’t paid tax on them, your heirs will never pay tax on the gains that happened during your lifetime. For example, whoever Jeff Bezos passes his Amazon stock on to, if they turn around and sell 100 billion dollars’ worth of it, they will pay zero dollars in taxes.
It’s a strategy. You get rich, and the way to avoid anyone ever paying taxes is to make sure you die with it. And if you’re asking, “Well, how do you afford the mega yacht if you haven’t sold your stock?” One common way is to use stock as collateral and borrow a loan against it. But there are also lots of rich people who don’t borrow, and don’t need to, because it turns out that even a small fraction of their money is enough to buy yachts and helicopters and things. So, the strategy is don’t sell your stuff, or don’t sell much of it, and you won’t pay very much tax.
But a wealth tax is not an income tax. It’s a tax on all the stuff that you own, whether you’ve sold it or not. So the strategy of “don’t sell” doesn’t help to avoid the California Billionaire Tax.
