Tax on Billionaires
Law, disrupted｜法律访谈
John is joined by John Bash, partner in Quinn Emanuel’s Austin office. They discuss a proposed California ballot initiative that would impose a one-time 5% wealth tax on individuals with net worth, including certain trusts, exceeding one billion dollars, if they are California residents as of January 1, 2026, with the tax calculated based on wealth as of December 31, 2026. The measure would amend the state constitution and apply broadly to both tangible and intangible assets. Several categories of assets would be exempt, including real estate, some out-of-state tangible property, and certain amounts held in retirement plans.
The proposal raises immediate practical concerns, particularly the difficulty of valuing illiquid assets such as privately held companies, intellectual property, or art, as well as the challenge of paying a substantial tax without readily available liquid assets. There is little to no historical precedent in the United States for a comprehensive wealth tax of this kind.
The initiative targets a very small group of taxpayers. Reports suggest that some high-net-worth individuals have already relocated in anticipation of the measure. The proposal is sponsored by a union and is framed as a response to perceived recent federal tax breaks which benefited wealthy individuals but harmed ordinary California voters because of reductions in healthcare benefits. Critics argue it may be both administratively unworkable and economically counterproductive.
Procedurally, the measure must qualify for the ballot through a signature-gathering process and, if approved by voters, would likely face immediate legal challenges. The proposal itself anticipates litigation and creates an expedited mechanism for facial challenges in Sacramento state court, direct appeals to the California Supreme Court and, ultimately, appeals to the U.S. Supreme Court for federal issues. The tax would not be enforced while these challenges are pending. It also provides that the legislature may only amend the proposal with a two-thirds vote and includes severability provisions designed to preserve portions of the law if others are struck down.
