California does not currently have a wealth tax. The California proposed wealth tax most people are asking about is one of two ideas: Assembly Bill 259, a 2023 legislative effort that would have imposed a 1% annual tax on residents worth more than $50 million (1.5% on billionaires), and a newer ballot initiative filed in November 2025 that would impose a one-time 5% tax on residents worth $1 billion or more. AB 259 died in committee in January 2024. The ballot measure, called the 2026 Billionaire Tax Act, is in its signature-gathering phase and faces open opposition from Governor Gavin Newsom, who has called it “really damaging to the state.”
What AB 259 Would Have Taxed
AB 259, introduced in January 2023, structured the tax in two phases. For tax years 2024 and 2025, only billionaires would have owed anything: 1.5% on net worth above $1 billion for single filers, or above $500 million for married taxpayers filing separately.
Starting in tax year 2026, the base would have widened sharply. A 1% tax would have applied to net worth above $50 million for single filers ($25 million for married filing separately). Billionaires would have paid an additional 0.5% surtax on wealth above $1 billion, for a combined 1.5% rate at the top.
The bill described the levy as an excise tax on the accumulation of wealth in California rather than a direct property tax. That framing mattered for the constitutional questions the bill would have faced.
Which Assets Would Have Counted
AB 259 defined “worldwide net worth” using the same valuation framework that governs the federal estate tax under Chapter 11 of the Internal Revenue Code. That definition sweeps in stocks, bonds, partnership interests, hedge fund stakes, cash and bank deposits, farm assets, and essentially every other form of financial wealth held anywhere in the world.
Some assets were carved out. Directly held real property, including a primary residence, was excluded. So was tangible personal property located outside California. Liabilities reduced the taxable base, so someone with $60 million in assets and $15 million in debt would have net worth of $45 million, below the $50 million threshold for single filers.
The real property exclusion carried a significant catch: it applied only to property held in your own name. Real estate owned through an LLC, corporation, or trust would have been counted in your net worth. To partially offset that, the bill would have allowed a credit equal to your pro-rata share of property taxes already paid on indirectly held real estate.
Charitable assets received some protection. Property transferred to a 501(c)(3) charitable trust would have been excluded so long as the transfer terms did not let the asset circle back as a private benefit to the donor. Retained control could have kept the asset in the taxable base.
The Exit Tax on Former Residents
The most contentious part of AB 259 was its four-year lookback on people who leave California. Under the bill, the state would have continued to tax a declining share of your worldwide net worth for up to four years after you stopped being a resident.
The math works as a fraction with four in the denominator. The numerator starts with your years of California residence during the prior four-year window and shrinks by roughly one each year you remain gone. Someone who lived in California for the full four preceding years and then moved to Texas on January 1 would owe the wealth tax on roughly 75% of net worth in the first year of non-residence, 50% in the second, and 25% in the third, before the obligation phased out. A mid-year move produces a slightly different result, because the departure-year numerator also accounts for the percentage of days spent in California that year.
Part-Time Residents
People who never establish full residency but spend meaningful time in California would have been pulled in through a substantial-presence test borrowed from IRC Section 7701(b)(3). You met the test if you were physically present in California for at least 31 days during the tax year and your weighted three-year total (current-year days, plus one-third of the prior year’s days, plus one-sixth of the year before that) reached 183 days or more. Wealth tax liability for a temporary resident would then be prorated based on the percentage of days actually spent in California during the tax year.
Credit for Wealth Taxes Paid Elsewhere
To prevent outright double taxation, the bill would have allowed a dollar-for-dollar credit for any net-worth-based tax paid to another jurisdiction. The credit was narrow. Only taxes calculated on net worth qualified. Income taxes, capital gains taxes, inheritance taxes, and transaction-based taxes would not have reduced your California wealth tax bill, even if the same assets triggered them.
Valuation and Compliance
Valuing publicly traded securities is straightforward. Everything else is not. AB 259 would have required certified appraisals for hard-to-value holdings such as closely held businesses, private equity stakes, and unusual intangibles. Each appraiser would have filed a copy directly with the Franchise Tax Board and declared “high,” “medium,” or “low” confidence in the valuation, giving the FTB a built-in flag for further review.
For assets that genuinely could not be valued with confidence at year-end, the bill contemplated a deferred tax liability, recognizing that a founder with $80 million locked up in an illiquid startup may not have the cash to pay a large tax bill immediately. Interest rates and repayment timelines for deferred amounts were left to FTB rulemaking.
Professional appraisals are expensive. Depending on complexity, a formal valuation can run from a few thousand dollars for a simple small business into six figures for large multi-entity structures. For a taxpayer near the $50 million threshold with a single closely held company, compliance costs alone could have run into the tens of thousands each year.
Why AB 259 Died
California’s constitution restricts how the state can tax personal property. AB 259 could not have taken effect on its own; it required a companion constitutional amendment, ACA 3, which needed a two-thirds vote in both legislative chambers and then voter approval at a general election. ACA 3 also died in committee.
The bill itself was introduced on January 19, 2023, and referred to the Assembly Revenue and Taxation and Judiciary committees. It sat for nearly a year, was heard once on January 10, 2024, and was immediately sent to the suspense file. Three weeks later, on January 31, 2024, it died automatically under Article IV, Section 10(c) of the California Constitution, which kills bills that fail to clear their house of origin by the session deadline.
Even with a state constitutional fix, federal challenges would have followed. The exit tax is where the legal risk concentrates. The Due Process Clause requires that a state have a sufficient connection to the person it seeks to tax; once someone moves and severs California ties, the argument that the state can keep taxing worldwide assets for four more years runs into the objection that the former resident no longer benefits from state services. The Dormant Commerce Clause adds a further test: any state tax must apply to activity with substantial nexus to the state, be fairly apportioned, not discriminate against interstate commerce, and be fairly related to benefits provided. No state has successfully imposed and defended this kind of exit-based wealth tax, and courts have struck down state efforts to tax nonresidents’ intangible property when that property received no benefit or protection from the taxing state.
The 2026 Billionaire Tax Ballot Initiative
With AB 259 dead, supporters shifted from the Legislature to the ballot. In November 2025, proponents filed Initiative No. 25-0024A1 with the California Attorney General, titled the “2026 Billionaire Tax Act.” Rather than an annual tax on a broad slice of wealthy residents, the measure proposes a one-time 5% tax on the net worth of California residents worth $1 billion or more as of January 1, 2026.
The rate phases in near the threshold. Anyone with net worth between $1 billion and $1.1 billion sees their rate reduced by 0.1 percentage points for every $2 million below $1.1 billion, tapering to zero at exactly $1 billion. Above $1.1 billion, the full 5% applies.
Revenue would flow into a dedicated fund split 90% to health care and 10% to education and food assistance. The initiative would add a new section to the California Constitution specifically authorizing this one-time levy, sidestepping the personal property tax restrictions that blocked AB 259’s path through the Legislature.
As of early 2026, the measure is in its pre-circulation phase. Proponents need to gather enough valid signatures to qualify it for the ballot. Governor Newsom told Politico in January 2026 that the proposal “makes no sense” and warned that some billionaires were already preparing to leave the state in response to the headlines alone.
Revenue Estimates and the Case Against
The Legislative Analyst’s Office estimated that a wealth tax would generate “tens of billions of dollars” spread over several years beginning in 2027, while costing “tens of millions of dollars per year” to administer. The same analysis warned that “it is likely that some billionaires decide to leave California,” and that the resulting loss of income tax revenue alone “could be hundreds of millions of dollars or more per year” on an ongoing basis.
For the ballot initiative, proponents project roughly $100 billion in one-time revenue. An independent analysis from the Hoover Institution at Stanford put the realistic figure at about $40 billion, less than half the proponents’ estimate, after accounting for behavioral responses such as asset restructuring and departures.
Several European countries have tried and abandoned broad wealth taxes. Today only Norway, Spain, and Switzerland still impose them. France, Sweden, Ireland, and Germany all repealed theirs, citing capital flight, disappointing revenue, and administrative costs. One study of Ireland’s repealed wealth tax found taxpayer compliance costs alone consumed 18.5% of revenue collected, with government enforcement costs eating another 14%. In France, analysts estimated the government lost twice as much in reductions to other tax revenue as it collected from the wealth tax itself. California’s top income tax rate is already 13.3%, which is why opponents argue the state is especially exposed to the same dynamic.
What This Means If You Live in California
No wealth tax is on the books right now, and none is scheduled to take effect. If you have net worth well below $1 billion, the only live proposal (the ballot initiative) would not touch you even if it passed, because it targets billionaires only. If AB 259 or a similar bill returns in a future session, the threshold to watch is $50 million in worldwide net worth, and the trigger to plan around is the four-year exit tax lookback, which would apply from the date you cease California residency rather than from the date any such bill takes effect. For now, the practical answer is that California’s wealth tax remains a proposal, not a law.