The California billionaire tax is headed to the ballot. The ultrawealthy are bracing for what comes next.

The proposed billionaire tax is set to appear on the California ballot in November.

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• California's proposed billionaire tax is headed to the ballot in November.
• Billionaires are bracing for the possible 5% tax, and could leave the state even if it doesn't pass.
• The measure is expected to draw a pricey campaign fight and, if passed, legal challenges.

The California wealth tax is one step closer to becoming reality.

The proposed tax measure, which would require billionaires to pay a one-time tax equal to 5% of their net worth, will appear on the ballot in November after opponents, including Gov. Gavin Newsom, failed to cut a deal with the union behind it before the June 25 deadline.

Now the 200-plus billionaires in California — which has more of them than any other state and most countries — are facing the reality that the tax could become law.

The ballot measure is expected to spark a pricey campaign fight and likely legal challenges, as Newsom and others have vowed to continue fighting it.

Advisors to the ultrawealthy say their clients are already bracing themselves for the wealth tax, and that billionaires are making moves out of California regardless of the outcome of the ballot measure.

"The cat's out of the bag," David Lesperance, a lawyer who advises the ultrawealthy on immigration, citizenship, and taxes, told Business Insider.

Lesperance said he had seven clients move out of California before January 1, 2026, as the measure is written to retroactively apply to billionaires who were living in the state as of that date. Several high-profile billionaires made moves to reduce their California ties ahead of that deadline, including Google cofounders Sergey Brin and Larry Page.

Although the tax has been framed as a one-time, 5% tax, Lesperance said his clients "always assumed it wasn't one time, it was the first time." So, even if they're already going to get hit with this tax, they may not stick around to wait for the next one.

Michael Cole, managing partner at R360, an exclusive, invite-only club for ultra-high-net-worth families, said the ultrawealthy have long felt burned by California and that many of them have already migrated out of the state.

He said the wealth tax could be the final straw, calling it "another example of people feeling like California is at the leading edge of undue tax onto those that succeed."

The billionaire tax is likely to face legal challenges if passed

Cole said one concern with the wealth tax is that it's unclear how 5% of a person's net worth will be determined, adding that it could be a logistical and administrative headache, especially for anyone whose wealth is tied up in private companies.

He said there are cases of founders whose assets may total over $1 billion but are almost entirely tied up in stock, adding they could "have to pay $50 million of cash when the value of the company has never been realized yet."

If the measure passes, legal challenges are widely expected, with some arguing its overall constitutionality.

Proponents of the tax say it's necessary to offset federal funding cuts.

Caroline Brehman/Bloomberg via Getty Images

Kristin Yokomoto, a private wealth and family office services attorney in FBT Gibbons' Newport Beach office, said some of those arguments could be about due process, the retroactive application of the tax, and the nature of the tax being applied to net worth rather than income.

Some individual situations could be challenging to address, for instance, how to consider out-of-state assets or what happens if a couple worth over $1 billion goes through a divorce.

Newsom, who has long opposed the tax, on Friday advocated instead for a federal wealth tax — one that would be harder for billionaires to evade by leaving the state.

While passing a federal wealth tax is still unlikely at this stage, Lesperance said it's already on the radar of his clients, whom he helps assess their best options for pursuing citizenship abroad.

Proponents of the tax, from which most of the revenue is planned to go toward healthcare services, say it's necessary to offset federal funding cuts. Some left-leaning opponents, including healthcare and labor groups that generally support raising taxes on the wealthy, have argued that the proposed measure is not a sustainable, long-term solution.

Lesperance said some of his clients are funding lobbyists to work on tax solutions that will serve them better and also satisfy California, adding, "The art of taxation is plucking the golden geese with the least amount of hissing."

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