California does not currently have a billionaire tax. Two proposals have tried to create one: Assembly Bill 259, which died in committee in February 2024 without a floor vote, and the California Billionaire Tax Act, a 2025 ballot initiative that would impose a one-time 5% tax on billionaire wealth if it qualifies and passes. Neither is law today, but both have produced enough detail to show what a California wealth tax would look like for the people it would reach.
The 2025 Ballot Initiative
The California Billionaire Tax Act was filed as a voter initiative rather than a legislative bill, bypassing the Assembly and Senate. The Legislative Analyst’s Office reviewed it under Elections Code Section 9005 and confirmed it proposes a one-time tax on the wealth of billionaires who were California residents as of January 1, 2026, with net worth measured as of December 31, 2026.1Legislative Analyst’s Office. New Tax on the Wealth of Billionaires [Ballot]
The rate is 5%, higher than anything in the failed legislative version, but it applies only once rather than every year, and only to those with net worth above $1 billion. The initiative has not yet qualified for the ballot, and its mechanics for valuation, residency, and enforcement have not been detailed in the same depth as the earlier bill.
What AB 259 Would Have Done
AB 259 is the most developed framework California has produced for a recurring wealth tax, so it is the clearest window into how such a tax would work. The bill was introduced during the 2023–2024 session alongside Assembly Constitutional Amendment 3, which was needed to allow the tax under the state constitution. The bill was filed with the Chief Clerk in February 2024 under Joint Rule 56, meaning it failed to advance and took no further action that session.
Who Would Have Owed It
AB 259 set two tiers. The first captured residents with worldwide net worth above $50 million, or $25 million for married taxpayers filing separately. The Franchise Tax Board estimated roughly 16,000 filers would fall into this group.2Franchise Tax Board. Bill Analysis AB 259 The second tier added a surcharge on net worth above $1 billion, or $500 million for married filing separately.
The structure phased in. For tax years 2024 and 2025, only the billionaire tier would have applied. The broader $50 million threshold would have kicked in starting January 1, 2026.3California Legislative Information. AB-259 Wealth Tax: False Claims Act
The Rates and the Math
For 2024 and 2025, the bill imposed a flat 1.5% tax on worldwide net worth above $1 billion. Starting in 2026, the structure shifts:
- 1% on net worth exceeding $50 million (or $25 million for married filing separately)
- An additional 0.5% on net worth exceeding $1 billion (or $500 million for married filing separately)
The rates are marginal, so they apply only to wealth above each threshold. A resident with $100 million in net worth would owe 1% on the $50 million above the threshold, producing a $500,000 annual bill. A billionaire with $2 billion would owe 1% on $1.95 billion plus an additional 0.5% on $1 billion, totaling $24.5 million.3California Legislative Information. AB-259 Wealth Tax: False Claims Act
What Counts Toward Net Worth
The bill defines worldwide net worth by reference to federal provisions, with a few important exclusions. Directly held real property is excluded entirely, along with mortgages and other liabilities secured by that property. Tangible personal property located outside California and held directly by the taxpayer is also excluded.3California Legislative Information. AB-259 Wealth Tax: False Claims Act
Those exclusions vanish when the same assets are held indirectly through a corporation, partnership, LLC, or trust. A $30 million home owned in your own name stays out of the calculation. Move it into an LLC, and it gets pulled back in. The bill expressly includes indirectly held real property and out-of-state tangible property “except to the extent that such inclusion is prohibited by the United States Constitution or other governing federal law.”4LegiScan. Bill Text CA AB259 2023-2024 Regular Session Introduced
Everything else of substance counts: stocks, bonds, business interests in private companies, intellectual property, interests in trusts, bank balances, brokerage accounts. For most people above the threshold, intangible financial assets would make up the bulk of the taxable base.
If You Move Out of California
Leaving the state would not end the obligation immediately. AB 259 uses a four-year lookback apportionment formula. The taxable portion of a former resident’s wealth is multiplied by a fraction with years of California residency over the preceding four tax years as the numerator and four as the denominator.4LegiScan. Bill Text CA AB259 2023-2024 Regular Session Introduced
Someone who lived in California for all four prior years would still owe about 75% of the wealth tax in the first year after leaving, 50% in the second, 25% in the third, and nothing by the fourth. Returning to California during the phase-out resets the general apportionment rule immediately.
Penalties and Valuation
The penalty regime is tougher than ordinary income tax enforcement. An understatement penalty of 20% applies when the understatement exceeds the greater of $1 million or 20% of the tax shown on the return. That penalty doubles to 40% if the understatement comes from failing to report an asset that was required to be listed separately on the return.4LegiScan. Bill Text CA AB259 2023-2024 Regular Session Introduced Omitting an asset is punished twice as severely as undervaluing one that was disclosed.
Compliance would be expensive. Publicly traded securities are easy to value from closing prices, but closely held business interests, private equity stakes, derivatives, and intellectual property all require formal appraisals from qualified third parties. Directly held real property and out-of-state tangible property are excluded from the tax itself but must still be listed separately on the return, giving the Franchise Tax Board a complete picture of each filer’s holdings.
Why Neither Proposal Can Take Effect on Its Own
California’s constitution caps the tax rate on intangible personal property at 0.04% and requires all property to be assessed at the same percentage of fair market value. A 1% or 5% wealth tax exceeds both limits. That is why AB 259 was paired with ACA 3, a constitutional amendment that would have carved out space for the wealth tax.
Without that constitutional change, a wealth tax cannot legally take effect even if the legislature passes it and the governor signs it. ACA 3 would have needed a two-thirds supermajority in both chambers and then voter approval. The 2025 ballot initiative goes directly to voters, but it still must override the same constitutional limits to operate.
How It Would Stack With Federal Taxes
A California wealth tax would create a large bill with little federal relief. Under IRC Section 164, the deductible categories of state and local tax are income, real property, personal property, and sales taxes. A net worth tax does not fit cleanly in any of them.5Office of the Law Revision Counsel. 26 U.S. Code 164 – Taxes
Even if the IRS treated a wealth tax as a deductible state tax, the SALT deduction cap limits the total state and local tax deduction to $40,000 (adjusted for inflation to $40,400 in 2026). For a filer owing millions in wealth tax, that cap is effectively meaningless. Stacked on California’s top income tax rate of 13.3%, the combined burden on affected residents would be among the highest in the country.