California’s Billionaire Tax: A $100 Billion Estimate Needs a Stress Test

Reported fact

The promise and the proposal

East Bay DSA’s current campaign page promotes the California billionaire-tax initiative with an estimated $100 billion revenue claim. It describes a March 2026 chapter vote to organize support. That is a campaign forecast on an undated page, checked October 23, not a new announcement.

Proposition 40 goes before voters November 3. The Legislative Analyst’s Office describes a one-time 5 percent wealth tax on billionaires resident in California on January 1, 2026, due in 2027, with a more costly five-year payment option. Ninety percent of proceeds would fund public health care; the remainder would support education, food assistance and administration. The proposal is neither an enacted appropriation nor money already collected.

Sources: East Bay DSA · California Legislative Analyst’s Office

Reported fact

The smaller forecast rests on consequential assumptions

An October 2026 NBER working paper by Benjamin Jaros and Joshua Rauh, both affiliated with Stanford and Hoover, estimates about $30 billion in collections within a $28–36 billion range. It excludes reported departures and disputed taxpayers and applies an assumed 50 percent litigation-survival weight. That legal-risk weight is not a court finding.

A separate simulation gives a mean discounted net revenue change of negative $38.9 billion. It combines simulated wealth-tax revenue with permanently lost income taxes over an indefinite future. Assumptions include losing 30–60 percent of billionaire income-tax payments, simulated wealth-tax revenue drawn uniformly from zero to $72 billion, and discounting net of growth at 1.5–4.5 percent. It assumes no new billionaires replace those who leave.

About 85 percent of the selected parameter combinations yield negative results. That fraction is not an established probability of failure. The $38.9 billion is neither an annual expense nor an observed loss.

Sources: Benjamin Jaros and Joshua Rauh / NBER working paper

Reported fact

The official forecast and competing research

The nonpartisan Legislative Analyst’s Office expects temporary collections in the tens of billions over several years, with possible ongoing income-tax reductions below $1 billion annually. It also projects administration costs potentially in the tens of millions per year for several years, paid from the new revenue. It does not give a comparable discounted net-present-value calculation. Its collection forecast remains sensitive to stock values and taxpayer avoidance.

A competing NBER working paper by Jasper Boll, Emmanuel Saez and Gabriel Zucman, revised in August, estimates $104 billion in its benchmark and $89 billion under a more aggressive departure scenario. It assumes January 1 residents remain liable even if they subsequently move, and includes 10 percent avoidance and evasion in its benchmark. It estimates annual income-tax losses of $150 million in that benchmark and $510 million in the departure scenario. Saez discloses unpaid advice on the initiative’s design and scoring. Both research papers are working papers, without peer review; their conclusions belong to the authors.

Sources: California Legislative Analyst’s Office · Jasper Boll, Emmanuel Saez and Gabriel Zucman / NBER working paper · Benjamin Jaros and Joshua Rauh / NBER working paper

Analysis

Service promises need a financing plan that survives uncertainty

The large gap should make campaigners explain their confidence in the advertised revenue. Taxing wealth to fund health care is a policy choice; treating a contested forecast as dependable funding would weaken public scrutiny of that choice. Public services deserve a financing plan that can survive lower or later collections.

Supporters should publish a comparison showing which residency, valuation, avoidance and legal assumptions drive the competing estimates. They should show the timing of net receipts after administration and explain how much recurring service support a temporary levy can sustain. They should also identify what happens to promised services if collections fall short: reduced commitments, replacement revenue or another funding source.

Open question

What is still unknown

The election, legal challenges, valuations and taxpayer responses remain unresolved. These forecasts do not establish how much the state will ultimately collect or lose. The Legislative Analyst’s Office also warns that conflicting Propositions 41 or 42 could block Proposition 40 if they receive more yes votes, depending on the courts.

Sources: California Legislative Analyst’s Office · Benjamin Jaros and Joshua Rauh / NBER working paper · Jasper Boll, Emmanuel Saez and Gabriel Zucman / NBER working paper