California voters to weigh 5% tax on billionaire wealth

California voters will decide in November whether to impose a one-time 5% tax on residents and trusts with net worth above $1 billion, a measure supporters say would raise money for health care and opponents say could weaken the largest U.S. state economy. The state’s nonpartisan Legislative Analyst’s Office said California would probably collect tens of billions of dollars initially, while warning that departures by some billionaires could reduce annual state revenue by hundreds of millions of dollars or more.

The proposal, backed by the Billionaire Tax Now coalition and advanced by the Service Employees International Union, would be the first U.S. tax of its kind if approved, according to CNBC. Taxpayers could pay the levy in five installments, but doing so would add a 7.5% deferral charge.

David Gamage, a University of Missouri law professor who helped design the measure for SEIU, told CNBC the tax is intended to offset health-care cuts in President Donald Trump’s so-called “Big Beautiful Bill.” He argued that California’s business climate depends partly on public services that make the state attractive to workers and employers.

“Businesses thrive in places and states where people want to live, and being a place where people want to live requires health systems working for the people in California,” Gamage told CNBC.

Newsom warns wealth can move

Gov. Gavin Newsom, a Democrat who is viewed as a potential 2028 presidential candidate, has opposed the ballot measure. In a Substack post last month, Newsom argued instead for a national wealth tax, writing that wealth is mobile and seeks lower-tax jurisdictions.

California already faces cost and regulatory pressures in business rankings. CNBC’s 2026 America’s Top States for Business placed the state at No. 17 overall, citing the highest cost of living in the nation, the fifth-highest cost of doing business and the fourth-worst business friendliness ranking. The state ranked No. 29 for quality of life, with CNBC noting that United Health Foundation data placed California at No. 48 for primary care providers per capita.

The Legislative Analyst’s Office said the proposal would likely produce a short-term fiscal gain. It also said some billionaires would probably leave California, taking income-tax payments with them.

The politics of the measure cut across party lines. Xavier Becerra, the Democratic nominee to succeed the term-limited Newsom, opposes the proposal largely because of its design, according to CNBC. Republican nominee Steve Hilton has said it would drive wealth creators out of the state.

Wealth mobility and the Norway comparison

Gamage told CNBC that fears of a large exodus are overstated and pointed to Norway, which has had a wealth tax since 1892 and raised it sharply five years ago. He said some people left Norway, but described the outflow as small compared with the revenue raised.

Other data show a more mixed picture. The World Bank said Norway’s economy grew 1.1% last year and was nearly flat in 2023. Civita, a center-right Norwegian think tank, reported that more wealthy Norwegians left in 2022 and 2023 than during the full 2014 to 2021 period, describing the increase as 518%. Norway closed loopholes around its 37.8% exit tax in 2024, according to Reuters.

Norway continues to run a budget surplus, though it is shrinking, and the World Bank says the country has among the lowest income inequality levels in the industrialized world.

Billionaires and labor groups split

Google co-founder Sergey Brin has contributed tens of millions of dollars to Building a Better California, a nonprofit backing a separate ballot measure that would blunt the wealth-tax proposal, according to CNBC. CNBC also reported that Brin has moved his primary residence to Nevada in case the tax is enacted.

Some labor groups have joined the opposition. The California Teachers Association said last month the measure would not provide sustainable, long-term funding for schools and communities.

Other wealthy Californians have signaled support or acceptance. Businessman Tom Steyer campaigned during an unsuccessful gubernatorial primary bid on taxing “billionaires like me,” according to CNBC. Nvidia Chief Executive Jensen Huang, who CNBC said could face a tax bill of nearly $8 billion if the measure passes, said in January he was “perfectly fine with it.”

Other jurisdictions are likely to study the vote. CNBC cited Washington and Massachusetts as states that have already aimed taxes at wealthy residents, while New York City Mayor Zohran Mamdani has enacted a pied-a-terre tax on expensive homes and proposed other measures targeting high-end wealth to address the city’s budget gap.

This story draws on original reporting from CNBC Markets.