SACRAMENTO, Calif. — The mere threat of a billionaire tax landing on the California ballot in 2026 has already prompted some of the state’s ultra-wealthy to move their residences and assets elsewhere, according to one tax adviser.

David Lesperance, who advises several ultra-high-net-worth individuals and families on tax and immigration matters, told The Bee in an interview that at least four of his clients – whom he did not name – have completed steps to move their official residences outside the state.

“The targets of this tax don’t need to be in California to make and maintain their lifestyle or their wealth,” Lesperance said in an interview Monday.

If it qualifies for the ballot, voters would not weigh in on the measure until November 2026. But the tax includes a retroactive clause that applies to billionaires and their assets residing in California as of Jan. 1, 2026.

The proposal is backed by the labor union SEIU United Healthcare Workers West as a direct response to federal cuts to Medicaid and food assistance programs approved earlier this year.

If successful, it would impose a one-time tax of 5% on individuals with assets worth $1 billion or more. Those affected could pay a lump sum or spread it over five years. The funds would be used to shore up health care and food assistance in California.

Suzanne Jimenez, SEIU-UHW’s chief of staff and the main proponent of the ballot proposal, called it a “dollar for dollar” replacement of the cuts in H.R. 1.

“There’s been a lot of focus recently on what if billionaires leave,” Jimenez said. “But what if we do nothing? What happens to the health care system in California if we don’t figure out how to fill this $100 billion hole? What this initiative is really about is making sure that folks don’t lose coverage because of these cuts.”

Would billionaires actually leave?

Billionaires including PayPal co-founder Peter Thiel and Google co-founder Larry Page are among those considering moving elsewhere, according to the New York Times. In addition to his U.S. citizenship, Thiel holds citizenship in New Zealand and Germany, his country of origin.

“The word is spreading. Those were my existing clients” who have already taken steps to leave the Golden State, Lesperance said. Others have begun requesting meetings with him in recent weeks.

“Will every one of them move? No,” he said. “It’s a personal choice.”

Jimenez called the relocation threats “a Chicken Little argument” and pointed to Massachusetts, where voters in 2022 approved a 4% tax on incomes above $1 million.

“There was all this fearmongering that millionaires were going to flee the state,” she said. “After the tax passed, that actually didn’t happen. In fact, there are more millionaires now in the state of Massachusetts than there was before that tax passed.”

A fiscal analysis from the nonpartisan Legislative Analyst’s Office acknowledged that if the SEIU-UHW proposal passes, “it is likely that some billionaires decide to leave California” and “the income taxes they currently pay to the state would go away with their departure.”

Progressive supporters of the tax argue that even if California loses some of its wealthiest residents, the state will survive.

“I echo what FDR said with sarcasm of economic royalists when they threatened to leave,” Rep. Ro Khanna, D-Fremont, wrote on X. “‘I will miss them very much.’”

Within hours of Khanna’s post, moderate tech-aligned Democrats in the Bay Area threatened to support primary challengers against him.

Billionaires and California’s budget

The threat of an exodus of wealth is a more pressing challenge for California’s governing Democrats, who must balance the annual state budget and have increasingly faced multibillion-dollar shortfalls.

With its progressive tax system, California disproportionately relies on its wealthiest residents to fund state government and services. In the 2022 tax year, the top 1% of earners paid nearly 39% of the state’s income tax revenues, according to the Department of Finance. The year prior, driven by a booming stock market and federal pandemic stimulus spending, it was nearly 50%.

Gov. Gavin Newsom has repeatedly cited those figures in his opposition to additional wealth taxes, including this latest proposal. His political adviser Dan Newman called it “yet another attempt to grab money for special purposes at the expense of the future general fund.”

State Sen. Josh Becker, another Democrat representing Silicon Valley, also took issue with Khanna’s arguments in favor of the tax.

“We have an extremely progressive tax system reliant on income tax,” he wrote. “Why would we want to drive those people out of our state by taxing unrealized gains?”

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