State-Level Wealth Tax Proposals and the California 2026 Billionaire Tax Initiative
State-level wealth tax proposals in the United States have evolved from broad net wealth taxes to highly targeted measures aimed exclusively at billionaires. The most significant active proposal is the California 2026 Billionaire Tax ballot initiative, which attempts to bypass traditional administrative and capital flight hurdles through innovative design choices.
The California 2026 Billionaire Tax Ballot Initiative
Designed by tax law and economics experts Brian Galle, David Gamage, Emmanuel Saez, and Darien Shanske, this proposed ballot initiative for the November 2026 California election is structured as a "one-time" tax rather than a recurring annual levy:
"Specifically, the proposed ballot initiative for the November 2026 election would impose a one-time 5% wealth tax on California billionaires, payable in annual installments of 1% over five years (with a small deferral charge). The tax is based on worldwide net worth of taxpayers valued as of December 31, 2026, excluding real estate property directly held."
Revenue Scoring and Assumptions
The initiative is estimated to raise $100 billion over five years (2027–2031), targeting only the roughly 200 wealthiest taxpayers in California. The scoring assumes a remarkably low 10% rate of tax avoidance and evasion:
"The Forbes billionaire list has 213 California billionaires with a collective wealth of $2.182 trillion... A 5% tax on $2.18 trillion raises $109 billion. Factoring in 10% of tax avoidance and evasion leads to a scoring of $99 billion that we round to $100 billion for simplicity."
This 10% avoidance assumption is highly optimistic compared to historical European wealth tax experiences, where narrow tax bases and numerous exemptions led to massive base erosion.
Private Business Valuation Mechanics
To address the notorious "valuation challenge" of non-marketable private business assets, the California initiative prescribes a rigid, formulaic default valuation:
"The tax applies by default a simple formula for private business valuations, which is: book value (the sum of all assets in the business) plus 7.5 times annual book profits (averaged over the most recent 3 years)."
While simple to compute, the authors of the Washington State Department of Revenue (DOR) Wealth Tax Study (2024) warn that such formulaic approaches can lead to severe undervaluation because they fail to account for a private business's "workforce or future prospects."
Capital Flight Mitigation
To prevent billionaires from fleeing the state to escape the tax, the California proposal relies on a retroactive residency capture date:
"Billionaires who are California residents, as defined by law, as of January 1, 2026 will have to pay the one-time tax in full; leaving after January 1, 2026 will not allow billionaires to avoid the tax... residency is already largely set and moving does not allow billionaires to avoid the tax."
Other State Proposals
Similar state-level wealth taxes have been proposed in Hawaii (1% tax on assets over $20 million), Illinois (a mark-to-market tax on taxpayers with assets over $1 billion), Vermont (taxing 50% of unrealized gains for individuals with net worth over $10 million), and Washington (1% tax on financial intangible assets over $250 million). However, none of these proposals have successfully passed into law, and many face severe state constitutional hurdles.