Forbes 400 wealth subject to state estate taxes fell from some $203bn to about $122bn
California voters will decide in November 2026 whether to approve Proposition 40, a one-time 5% tax on the wealth of billionaires residing in the state on 1 January 2026. Eduardo Porter’s October 27, 2026 analysis in The Guardian examines the proposal through revenue estimates, migration evidence and legal risk. It draws on research by Enrico Moretti and Daniel Wilson in which more than a fifth of Forbes 400 billionaires who originally lived in states with estate taxes had moved to states without estate taxes by 2010, while only about 1% had moved in the opposite direction.
The revenue estimates differ sharply. As of early October, the Forbes billionaires list counted 260 billionaires in California and nearly $2.5tn in wealth, which at 5% would produce some $110bn; much of that money would replace Medicaid funding cut by Trump’s One Big Beautiful Bill Act last year. Stanford University economists estimated the measure would raise only around $30bn, while lost income-tax revenue would cost California nearly $39bn in net present value. Porter said the Stanford estimate was consistent with studies of wealth-tax avoidance in Swiss cantons and behavioral research on how wealthy people respond to other taxes.
Six Nobel Prize-winning economists on the left endorsed the measure in an open letter, calling it “the first-ever tax on billionaire wealth enacted anywhere in the world.” They said it “will kickstart a movement to tax ultra-high-net-worth individuals in other states – and eventually at the federal level and in other countries,” and that the vote “may well come to be seen as a turning point in the battle between democracy and oligarchy.” The letter also addressed the January 1 residency cutoff: “Some affected taxpayers may have tried to leave between the time they learned about the proposed ballot initiative – in late November 2025 – and January 1st of 2026.” The economists added: “But the window was so short that it is unlikely any significant number of billionaires successfully cut ties with the Golden State in such a short period of time.”
Supporters and opponents staged rallies on 5 October 2026: Senator Bernie Sanders spoke for the measure in Los Angeles, while opponents gathered at the Iron Workers Apprenticeship Training Center in La Palma, California. Porter described the proposal as controversial even among left-leaning economists and politicians. Governor Gavin Newsom, whom Porter called virtually certain to run for the Democratic nomination ahead of the 2028 presidential election, and Xavier Becerra, the Democrat running to succeed him as governor, opposed the measure because they feared billionaires would move to lower-tax jurisdictions. A September poll found Proposition 40 just short of majority approval.
Google co-founder Sergey Brin has helped coordinate some $200m to oppose Proposition 40 and promote rival Propositions 41 and 42. One of the countervailing measures would bar retroactive taxes, place wealth accumulated in the past beyond the tax’s reach and forbid new taxes on financial assets or other personal property. Brin has said Proposition 40 reminds him of the Soviet Union, which he fled with his parents in 1979. Porter wrote: “Apparently he prefers a social arrangement more like the one that prevailed in the Czarist Russia in which a narrow few amass vast riches unencumbered by a responsibility to contribute to societal wellbeing.” Porter also wrote that Elon Musk may believe welfare recipients are the “parasite class” and that empathy is “the fundamental weakness of western civilization.”
Legal and behavioral risks could determine whether the measure produces revenue. Some optimistic analyses assumed avoidance tactics by California billionaires would reduce the taxable pool of wealth by only about 10%; others were less sanguine. Porter said the tax would be taken to court even if it passed, including on grounds that retroactive taxation violates due process, and might not survive litigation. Real estate would not be taxed, and some foreign billionaires might qualify for protection under double-taxation treaties. More billionaires could leave if they assumed a measure presented as one-time would become permanent, reducing future income-tax receipts.
Some wealthy California residents had already moved business interests or residences out of the state. In the run-up to Christmas 2025, Brin and Google co-founder Larry Page moved many of their business interests out of California and bought homes in other states. Travis Kalanick, the former chief executive of Uber, left for Texas after Musk, while PayPal and Palantir mogul Peter Thiel moved his residence to Miami last year. California’s billionaire count still rose by 20 between January and October, and the state’s billionaires’ collective wealth grew by $400bn so far that year.
The migration record is mixed. Porter noted that Trump’s 2017 Tax Cuts and Jobs Act capped the deduction for state and local taxes and was expected to prompt affluent residents to leave high-tax blue states because they could no longer deduct those payments federally. A study by a Cornell sociologist and an economist at the Treasury Department found almost no impact on affluent migration rates, at least in the first year after the change. New York City’s top city income tax rate of 3.9% applies on top of a 10.9% state rate, compared with zero in Miami. An Oxfam report counted 154 billionaires in New York state. Nine of the 10 richest live in New York City, and California is the only state with more billionaires than New York.
Porter’s principal historical comparison begins in 2001, when George W. Bush’s Economic Growth Tax Relief and Reconciliation Act eliminated the federal credit that offset state estate-tax liability on the ultra-wealthy. Billionaires’ liability then depended on their state of residence. At that time, New York, Pennsylvania and Connecticut levied estate taxes, while Texas, Florida and California did not, making death in an estate-tax state more costly. Moretti and Wilson found the location of the very rich was highly sensitive to estate taxes. By 2010, more than a fifth of Forbes 400 billionaires who originally lived in an estate-tax state had moved to a non-estate-tax state, while only about 1% had moved in the opposite direction. The economists estimated that by 2017 estate-tax states had lost 23 of the 72 Forbes 400 billionaires who lived there in 2001, and that Forbes 400 wealth subject to state estate taxes fell from some $203bn in 2001 to about $122bn 16 years later. Porter described estate taxes as “a good fit for a democratic nation that conceives itself as a meritocracy” and “a tool to prevent the emergence of a hereditary aristocracy passing economic and political power down the generations.”
Porter said estate-tax states did not just lose the income-tax revenue of departing billionaires. He identified business relocations by plutocrats as an additional loss not considered in Moretti and Wilson’s study. The taxes, he said, could deter other billionaires from entering an estate-tax state or encourage billionaires who remained in those states to try more aggressive tax-avoidance strategies than usual. Moretti described the tax gap between red and blue states as enormous, with California’s top marginal rate at 13.5% and Florida’s at zero. In separate research on what top scientists and engineers do when states raise income taxes, Moretti told Porter, “People do leave,” adding, “These are not billionaires, but only highly paid workers.”
Porter cited Nobel Prize-winning economists Daniel Kahneman and Angus Deaton, who proposed that rising income increased emotional wellbeing only up to a ceiling of about $115,000 in today’s money. He wrote that the ultra-rich may not pursue happiness in the joyful sense but would try every trick to retain their wealth and make the task more difficult for tax authorities. Porter called that one of the most intractable challenges to the solvency of the American state and the survival of American democracy. He wrote that the top 1% at the apex of the economy held more than 31% of the nation’s total wealth, about $55tn in net worth, and that getting this group to share with society, fund redistribution or pay for public goods was “proving pretty much impossible.” That group’s ability to move resources around, hide profit across jurisdictions and minimize income to hoard wealth until they die, he said, appeared to put them beyond taxation’s reach.
A research paper cited by Porter found that the country’s richest 384 people paid only 24% of their economic income in 2025, compared with 30% for the average taxpayer. Porter noted that not all of those 384 people were receiving top-notch tax advice. ProPublica reporting found that some of the richest Americans, including Elon Musk, Jeff Bezos, Warren Buffett and Michael Bloomberg, lived largely tax free.
Porter said taxing billionaire wealth was not technically impossible. He said federal estate-tax rules could be cleansed of loopholes that allow dynastic wealth to accumulate, including rules that let unrealized capital gains accrue tax free forever and pass to heirs with the gains reset to zero; he also proposed raising taxes on capital income to restore fairness between capital and labor. Economists Erick Zwick of the University of Chicago and Owen Zidar of Princeton proposed restoring the federal tax schedule to where it stood in the Clinton administration 30 years ago. They estimated the change would raise $5tn over a decade and said the main challenge was political: overturning an equilibrium that over the last 50 years had largely revolved around cutting taxes.
Porter presented the argument that a less progressive, flatter tax structure could raise more money. European countries fund a large share of their welfare programs with value-added taxes on consumption, which are harder to avoid but place a heavier burden on lower-income people because they consume a larger share of their paychecks. Porter wrote that “the idea of letting plutocracy off the hook seems unacceptable.” He also wrote: “But the hard truth for blue states eager to raise more revenue to fund the social safety net and pay for public goods is that they are not up to the task, given competition from Republican-run states where taxes are anathema.”
Porter wrote that restoring fairness and efficacy in the American state was “in the end not a task for the states.” Government collects almost 3% of GDP less in taxes than it did at the turn of the century, and more than 2% of that decline was about federal revenues. The average central government in the Organization for Economic Cooperation and Development raises twice as much in taxes, as a share of GDP, as the US federal government. Porter called the problem “a political problem” that would “remain intractable as long as half of the political spectrum believes its only job on this earth is to cut taxes.” He asked billionaires to consider the social contract in which they wanted to live, including whether they preferred broad-based prosperity or insulating their wealth from broader obligations. Porter concluded: “It is essential not just to fund the public goods the nation needs to function. It’s indispensable to restore a sense of fairness to the American experiment. Democracy cannot endure without it.”