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By Shane Croucher
Senior Editor
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Google cofounder Sergey Brin had two answers to California’s billionaire tax. One was buying a $42 million home on the Nevada side of Lake Tahoe. The other was raining more than $100 million on a campaign to defeat it.
The result is now clear. Californians have rejected Proposition 40, a one-time 5 percent levy on the net worth of the state’s billionaires. Brin’s $100 million splurge was worth it, and his $42 million insurance plan unnecessary.
But his two answers to the threat of Prop 40 capture what we can call the Billionaires Paradox. It explains the tension at the heart of a wealth tax like the one proposed in California, a haven for wealthy liberals and progressives.
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Here is the paradox. The more billionaire wealth a state accumulates, the more tempting it is to tax, especially where progressive politics reigns. But that same wealth buys its owners two formidable defenses—the freedom to leave and the money to fight.
Moreover, in another irony, it’s the liberal culture of Californian cities such as San Francisco that attracts tech founders and their workforces like bees to pollen. But that same progressive liberalism is the driving force of this push for wealth taxes.
Take note of what voters didn’t reject. On the same ballot, they approved Proposition 3, which makes permanent the higher income-tax rates paid by the state’s top 2 percent of earners. Californians will tax the rich. But they balked at betting on the richest staying put.
The temptation is easy to see. Economists Jasper Boll, Emmanuel Saez and Gabriel Zucman recently estimated that California’s billionaires were worth $2.3 trillion by mid-2026, about as much as all Californians report in income in a year.
Their fortunes grew 144 percent between 2023 and 2025, riding the AI boom.
Such abundance of wealth makes redistribution easy to imagine, too. By the nonpartisan Legislative Analyst’s estimate, Prop 40 would probably have raised tens of billions of dollars over several years, 90 percent of it earmarked for health care to offset federal cuts.
The state Democratic Party endorsed it, as did the prominent progressives Senator Bernie Sanders and Representative Ro Khanna, who called it "the most important ballot initiative in America."
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But Democratic Governor Gavin Newsom opposed it, warning that it would drive the state’s richest residents away. And that’s no idle fear.
Four men—Brin, fellow Google co-founder Larry Page, Meta’s Mark Zuckerberg, and Nvidia’s Jensen Huang—hold nearly $1 trillion in business wealth, about 40 percent of the state’s billionaire total.
Two of them, Brin and Page, began moving out before the tax’s January 1 residency cutoff. Hoover Institution economists Joshua Rauh and Benjamin Jaros estimate that nearly 30 percent of the tax base left before the measure even qualified for the ballot.
It’s too far to suggest that California lives off its billionaires. By Boll, Saez, and Zucman’s count, they paid about $3.2 billion a year in state income tax from 2023 to 2025—just 2.4 percent of the total.
The dependence is subtler. The state’s own budget warns that its revenue rides the stock market, through high earners’ capital gains and stock-based pay, and a sustained slide of more than 20 percent could leave it up to $20 billion below forecast.
Billionaires matter less for the tax they pay than for the boom they represent. Many of their companies are centered in California. They create high-earning taxpayers and jobs and attract snowballing investment in the state.
Wealth also buys a voice. The main opposition committee raised more than $333 million. Opponents outraised supporters about tenfold. The committee also backs Proposition 42, which would write a ban on new taxes on financial assets into the state constitution.
In Monday’s count, Prop 42 was ahead, having drawn about 450,000 more yes votes than the billionaire tax.
"Buying an election is not the same as winning the debate," the measure’s backers said on Monday. They have a point. But the spending is exactly the Billionaires Paradox: a fortune big enough to be worth taxing is powerful enough to fight back.
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Nor does the research settle the economics of it. An October study in the American Economic Review, using Scandinavian data, found that each percentage-point rise in the top wealth-tax rate cut the number of wealthy taxpayers by about 2 percent.
But, crucially, it barely dented the wider economy. Investment fell 0.07 percent, and value added by 0.10 percent. Then again, leaving Sweden means leaving the country. Leaving California can mean moving across a lake to a big new mansion.
California-specific estimates diverge further. Saez, who advised on the measure’s design, and his co-authors projected about $100 billion with minor income-tax losses.
Rauh and Jaros projected roughly $30 billion in collections and, counting income tax lost to departures, a net loss of $38.9 billion. The Legislative Analyst landed in between: tens of billions in temporary revenue, with possible ongoing income-tax losses of under $1 billion a year.
When experts can’t agree whether the tax would leave California richer or poorer, "no" looks like the safer vote until such questions are resolved.
Supporters say they could return in 2028 if Sacramento offers no fix of its own. Progressives see wealth taxes as a question of fairness, and a clear financial pathway to better-funded public services that are stretched by needlessly tight budgets.
Should Prop 42 survive the count, a similar tax would first need another constitutional amendment. Any rematch would be a test.
If the paradox holds, every new AI fortune will make the prize bigger and the resistance even stronger. But if a bigger tax on bigger fortunes passes anyway, the paradox is dead.
For now, the bet is that the paradox holds. Every new billionaire makes the tantalizing prize of a wealth tax larger—and ever harder to claim.
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