California Gov. Newsom Pledges To Defeat Proposed Wealth Tax as Some Billionaires Eye Exit

California Gov. Gavin Newsom this week came out strongly against a proposed wealth tax, revealing that he has been tirelessly working to kill the measure because he believes it will trigger an exodus of billionaires from the state.

The controversial proposal championed by the health care union Service Employees International Union-United Healthcare Workers West calls for California’s wealthiest residents with a net worth of $1 billion and more to pay a one-time tax equivalent of 5% of their assets.

California is home to some 200 billionaires—the most of any state— and supporters of the measure say it could generate roughly $100 billion in revenue, with 90% earmarked for health care services. 

But opponents of the initiative, led by longtime wealth-tax critic Newsom, argue that the likely drawbacks outweigh the benefits. 

In an interview with the New York Times published on Tuesday, the Democratic governor—and likely 2028 presidential candidate—said if the proposed billionaires' tax ends up on the ballot in November, he would do all he can to "protect" California from it.  

"This will be defeated, there's no question in my mind," Newsom told the Times. 

One of Newsom’s main concerns is that the proposed wealth tax could drive tech entrepreneurs out of California, not only depriving the state of tax revenue but also undercutting an innovation engine that has powered the region’s economic growth for decades. 

California billionaire flight is underway

Although the wealth tax is far from a done deal at this stage, some California billionaires already seem to be headed for the hills.

Palantir and PayPal co-founder Peter Thiel, who has an estimated net worth of $27.5 billion, has shifted some of his family investment firm's operations from California to Miami in late December.

Thiel's company is still headquartered in Los Angeles, and he owns a home in the Hollywood Hills, but a press release announcing the opening of his new Miami office stressed that he has owned a residence in the city since 2020.

Earlier last month, fellow venture capitalist David Sacks opened a satellite office for his firm, Craft Ventures, in Austin, TX.

Google co-founders Larry Page and Sergey Brin, who have an estimated combined wealth of $518 billion, according to Forbes, have also reportedly been moving some of their business entities and assets from California to Florida. 

"This is what I feared, and it’s come true," Newsom told the Times of the billionaire exodus. 

But not all of California’s richest 1% are eyeing an exit over the wealth tax. 

Nvidia CEO Jensen Huang, the world's eighth-wealthiest man with a reported net worth of $163 billion, according to Forbes, recently said he has no plans of leaving California over the proposed ballot initiative. 

"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. It never crossed my mind once," he told Bloomberg Television last week.

Wealth tax proposal explained

The proposal must receive more than 870,000 signatures by spring to be placed on the ballot this November. 

Proponents are framing the effort as an "emergency" measure "to prevent the collapse of California health care."

The bulk of the revenue expected to be generated by the tax would be used to offset federal funding cuts to health care for low-income Californians, with 10% set aside to fund K-12 public schools and food assistance.  

The California Budget and Policy Center, a think tank, previously estimated that the state could lose $30 billion a year for Medicaid, potentially leaving up to 3.4 million people without medical insurance.

Should the tax proposal pass, the Golden State's billionaires would be required to pay the wealth tax for the 2026 tax year, with the revenue replenishing the budget beginning in 2027, reported the Associated Press. The 5% net wealth tax could be paid over five years with interest.

To prevent billionaires from exploiting loopholes, the law is written to calculate their net worth based on their worldwide assets, including stocks, trusts, real estate holdings, art, and interest in private companies, so moving those assets out of California won't let them off the hook.  

The only way billionaires could avoid paying the tax is if they left the state before New Year's Eve 2025. 

In 2024, a bill seeking to impose a 1.5% annual tax on billionaires failed in the California Legislature after Newsom made it known that he would veto it if it landed on his desk. 

But because the latest wealth tax proposal is taking the ballot initiative route, if Californians vote to adopt it in November, Newsom will not be able to strike it down. 

With that in mind, business leaders have been pouring millions of dollars into political committees working to undermine the wealth tax, with Thiel contributing $3 million to one such group, according to a recent AP report. 

The California Business Roundtable, which is spearheading the effort to kill the proposal, warns that it could "undermine our economy, decimate the state budget, drive investment out of the state, and ultimately make everyday life more expensive for working families."