A proposed California wealth tax aimed at billionaires includes provisions that make avoiding the levy exceptionally difficult, according to tax attorneys.
The measure, known as the Billionaire Tax Act, could appear on the state’s general election ballot in November.
If approved, it would impose a one-time tax of 5% on the total wealth of California residents with net worths of $1 billion or more.
Unlike most new taxes, the proposal includes a retroactive start date of Jan. 1, 2026.
That feature sharply limits the ability of wealthy residents to change their tax status after learning of the plan.
California is estimated to be home to between 200 and 250 billionaires.
Attorneys say the early effective date was intentionally designed to prevent last-minute departures.
“The reason they did this is obvious,” said Christopher Manes of Manes Law.
“If they had made the date in November, after passage, you’d have 200 people who could get out in time and save millions of dollars.”
The proposal became public in December, leaving little time for affected residents to restructure their affairs.
Several billionaires have already taken steps to establish residency elsewhere.
Tech billionaire Peter Thiel recently said he had built a significant presence in Miami over several years.
He noted that he has maintained a personal residence there since 2020 and an office for Founders Fund since 2021.
Attorneys say at least two other California billionaires have also moved or are planning to move.
Others have taken a more accepting view.
Nvidia CEO Jensen Huang said he was unconcerned about the proposal.
“I’ve got to tell you, I have not even thought about it once,” Huang said.
“We chose to live in Silicon Valley, and whatever taxes I guess they would like to apply, so be it. I’m perfectly fine with it.”
The proposal is backed by the Service Employees International Union-United Healthcare Workers West.
The group said the retroactive date ensures billionaires “can’t avoid responsibility by moving their assets or claiming residency elsewhere.”
Supporters estimate the tax could raise $100 billion to offset healthcare cuts and fund public services.
Tax attorneys, however, say the aggressive structure all but guarantees legal challenges.
They also warn it complicates planning for founders ahead of liquidity events or company sales.
California determines tax residency using a “closest connection test.”
The test evaluates ties such as property, family, business interests, and social connections.
Manes said proving a change of residency requires clear evidence of intent.
“Intent is critical,” Manes said.
“You have to show you intended to leave California indefinitely, permanently.”
Because the process often takes months, attorneys say avoiding the proposed tax would be extremely difficult.
“On its face, the ship has sailed,” Manes said.
The proposal still faces voter approval and political opposition.
Gov. Gavin Newsom is coordinating efforts to defeat the measure.
Attorneys also expect lawsuits challenging the constitutionality of the retroactive provision.
“I think the strongest legal challenges will be from people who leave before it’s passed,” said Jon Feldhammer of Baker Botts.
“You’re talking about the most portable class in America,” Feldhammer said.
“They have the means and ability to move very quickly.”
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