California's 'Wealth Tax' Could Cost the State $39 Billion

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Cite

Boehm, E. (2026, October 20). California's 'Wealth Tax' Could Cost the State $39 Billion. Reason. https://reason.com/2026/10/20/californias-wealth-tax-could-cost-the-state-39-billion/

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Reason · collected 2026-10-20 · by Eric Boehm

Quick Summary

Researchers at Stanford University warn that California's proposed "wealth tax" on billionaires could backfire, potentially costing the state $39 billion in lost income taxes if wealthy residents leave. The ballot measure, Proposition 40, would impose a one-time 5 percent tax but may generate only about $30 billion due to anticipated departures of some billionaires, such as Peter Thiel and Larry Page, who together represent over $539 billion in wealth. This proposed tax has split the Democratic party, with Governor Gavin Newsom opposing it while Rep. Ro Khanna supports it, highlighting the contentious debate surrounding its potential economic impacts.
Written locally by qwen2.5:14b on 2026-10-20, using this article's own text rather than the other coverage of the same event (that is the story summary below).

AI analysis runs on qwen2.5:14b, locally

Story summary

California voters will decide next month whether to approve Proposition 40, a proposal aimed at generating billions for healthcare by imposing a one-time 5% tax on billionaire wealth. However, Stanford University economists Benjamin Jaros and Joshua Rauh caution that this measure could backfire, potentially resulting in the state losing more money than it gains. Their study, published by the National Bureau of Economic Research, indicates that seven billionaires have already moved out of California, taking with them about $540 billion or 30% of the state's total billionaire wealth. This includes well-known figures like Peter Thiel and Larry Page. The researchers estimate that while the tax might generate around $30 billion, long-term income tax losses could range from $1 billion to $3.5 billion annually, totaling up to $39 billion over time.

Written for “California Wealth Tax Backlash” on 2026-10-20, grounded in this article and the 1 other(s) covering the same event.
Why this leaning score
The model judged this article politically coded and scored it -0.35, but none of the 3 quote(s) it offered could be found in the article text, so the score is not published.
Written under an earlier scoring contract, which gave a paragraph rather than checkable quotes. Re-analysing this article replaces it.
Leaning score withheld for article 94443: no verified evidence · logged 2026-10-20

Story

📰 California Wealth Tax Backlash
Economy/Business · 2 article(s) covering the same event. See how they differ ↓

Compared with similar articles

This article reads unscored and hedges 21% of its claims. Each row says how that neighbour differs.
CBS News · 0.85 cosine similarity
⚖️ leaning not scored 🔴 30% hedged 6 of 20 📰 publisher trust 66
“Both articles report on a Stanford study warning about potential negative consequences of California's proposed billionaire tax.”
How this article was measured signals, leaning charts, publisher record, byline, topics and claims

Signals How these are calculated →

Claims extracted
19
sentences that state something as happening or true
Uncertain
21%
4 of 19 hedged ("reportedly", "may", "according to")
Leaning
withheld
no quote in the article backed the model's score
Publisher signals
67/100
Reason's corrections and hedging, across everything collected from it. Not a measure of accuracy.
Outlets on this story
2
Economy/Business
Same framing elsewhere
1
articles that frame the event the way this one does
Analyzed 2026-10-20 · how these are computed

How this is being covered How these are calculated →

Article leaning vs. publisher reliability
Source leaning vs. consistency

Publisher

Reason · 833 article(s) · 4 correction(s) detected
Running correction rate · 4 correction(s)

Who wrote this

Eric Boehm
16 article(s) here · 1 carrying a prediction
🔮 A proposed "wealth tax" on California's billionaires could backfire and cost the state tens of billions of dollars in the long run.
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🔮 Pretti's death would quickly become a national news story.
🔮 The Trump administration has touted the recent announcement of a new steel plant in Iowa as proof that the tariffs are working to revitalize American manufacturing—which is only true if you look at the benefits while willfully ignoring the costs.
🔮 And Brown argued that his Public Employees' Pension Reform Act (PEPRA), which pared back benefits mostly for new hires, would stabilize the state's pension funds right about now.
🔮 This may seem like it's all quite deep in the weeds—but the Biden administration's failed attempt to embed this flawed research into dietary guidelines provides a useful glimpse into how public health expertise can be colored by motivated activists.
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Also by Eric Boehm
Nothing else under this byline is closely related to this article, so these are simply their most recent.
All 16 articles by Eric Boehm →

Topics

California Democrats Proposition 40 Stanford University the Billionaire Tax Act

Subjects

California GPE · 6× America GPE · 1× Benjamin Jaros PERSON · 1× Calif. GPE · 1× Democrats NORP · 1× Gavin Newsom PERSON · 1× Joshua Rauh PERSON · 1× Peter Thiel PERSON · 1× Ro Khanna PERSON · 1× Stanford University ORG · 1×

Narrative

Including those two, the seven billionaires who have publicly said they are leaving the state represent more than $539 billion of the nearly $1.9 trillion aggregate net worth of California's billionaires, the researchers note.
framing: mixed · carried by 1 article(s) · first seen 2026-10-20
🔮 A proposed "wealth tax" on California's billionaires could backfire and cost the state tens of billions of dollars in the long run.
2026-10-20 · Reason
California's 'Wealth Tax' Could Cost the State $39 Billion · mixed framing

Claims (19 extracted, 4 hedged)

A proposed "wealth tax" on California's billionaires could backfire and cost the state tens of billions of dollars in the long run. uncertain
tax → propose → run
If the proposed tax drives wealthier residents out of the state, California could end up losing between $1 billion and $3.5 billion annually in income taxes, according to a working paper published this week. uncertain
California → propose → paper
A pair of researchers at Stanford University warn that the state could end up losing an estimated $39 billion because of the consequences of the wealth tax. uncertain
state → warn → tax
"These findings suggest that the Billionaire Tax Act will not fulfill the primary functions for which it was designed," write researchers Benjamin Jaros and Joshua Rauh. asserted
Jaros → suggest → which
Voters in California will decide next month whether to impose the one-time, 5 percent tax when they vote on Proposition 40. asserted
they → decide → Proposition
The ballot measure is dividing Democrats—Gov. Gavin Newsom opposes it, while progressive Rep. Ro Khanna (D–Calif.) claims it is the "most important ballot initiative in America and a fight for the soul of our party. uncertain
it → divide → party
" And it's already spurring some billionaires to flee the state—including venture capitalist Peter Thiel and Google co-founder Larry Page. asserted
it → spur → Thiel
Including those two, the seven billionaires who have publicly said they are leaving the state represent more than $539 billion of the nearly $1.9 trillion aggregate net worth of California's billionaires, the researchers note. asserted
researchers → include → billionaires
With other departures likely happening more quietly, the new study estimates that the tax will generate about $30 billion, a far cry from the $100 billion that the tax's supporters expect. asserted
supporters → happen → that
The "behavioral response" from billionaires in California "has eroded most of the projected tax base," write Jaros and Rauh. asserted
Jaros → erode → base
In the long run, however, the state is likely to lose out. asserted
state → lose → run
After running 100,000 simulations using different assumptions, the two researchers report that "85 percent of plausible outcomes produce a negative" result in state revenue. asserted
percent → run → revenue
Other recent experiments with special taxes on wealth have backfired in similar ways. asserted
experiments → backfire → ways
In response to a new wealth tax in Washington State, Jeff Bezos relocated to Florida, and iconic Seattle brand Starbucks shifted more of its corporate headquarters to Tennessee. asserted
Starbucks → relocate → Tennessee
Studies have shown that a "millionaires tax" in Massachusetts contributed to wealth moving out of that state. asserted
wealth → show → state
And if you were a billionaire living in California, why would you stick around? asserted
you → live → California
Polls show voters are narrowly divided over Proposition 40. asserted
voters → show → Proposition
A Politico poll published earlier this month showed 46 percent of voters plan to vote for the measure, while 43 percent oppose it. asserted
percent → publish → it
Voters were similarly divided when asked if they expected it to pass or not. asserted
it → divide → ?
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