California’s proposed 5 percent wealth tax seems like a simple solution to increase state revenue, yet opposition spans the political spectrum. Organizations like Planned Parenthood Affiliates of California, the California Teachers Association, and Governor Gavin Newsom stand against the plan.
The concerns center on the economic impact of taxing the accumulated assets of California’s ultrawealthy. Historical evidence shows that similar taxation approaches in other countries have led to unfavorable outcomes.
In 1990, twelve industrialized nations implemented wealth taxes. By 2025, nine had repealed these taxes. Countries like Denmark, Sweden, Germany, the Netherlands, and France found that wealth taxes are difficult to implement. They realized such taxes cause wealthy individuals to relocate, taking their capital with them, and result in lower-than-expected revenue.
France exemplifies the pitfalls. After imposing a wealth tax, an estimated 200 billion euros exited the country over two decades. France eventually repealed the tax in 2018 due to a 7 billion euro annual budget shortfall.
California risks facing similar challenges. Analyzing the 212 billionaires targeted by the proposed tax, the revenue is projected to be $40 billion, far less than the claimed $100 billion. Preemptively, significant figures, such as Google co-founders Sergey Brin and Larry Page, moved out of California before the December 31, 2025, residency deadline. This exodus, accounting for 30 percent of the targeted wealth base, reduces potential revenue significantly.
The departure of these high-profile residents will likely damage the state’s economic foundation. These individuals not only contribute to wealth tax revenue but also generate ongoing income tax revenue. California might face a more challenging scenario than European countries, as moving between states is easier than between countries.