MW California is one step closer to America's first billionaire wealth tax - and the divide between red and blue state taxes is getting deeper
Andrew Keshner
There are diverging paths on state income taxes
Supporters of a 5% wealth tax on California billionaires speak Monday after collecting more than 1.5 million signatures for the November ballot measure.
This year is shaping up to be a milestone moment for state income taxes after last year's massive changes to federal income taxes. It may also shape up as a major test as to whether rich households move away in the face of tax hikes.
The backers of a 5% wealth tax on California billionaires said Monday they've collected more than 1.5 million signatures, more than enough to put the measure on the ballot in November.
The ballot measure is a response to last year's massive Republican law that extended tax cuts and created new ones, while cutting funding for low-income health and anti-hunger programs.
If passed - and upheld in court - the Golden State's one-time wealth tax would be the first in the nation. It remains to be seen whether it's even legal for a state to tax based on net worth, so the California tax may not even be enforced if it becomes law.
Suzanne Jimenez, chief of staff at SEIU United Healthcare Workers West, a union that's been leading the charge on the ballot measure, said billionaires will be good for the money. "They are able to figure out how to buy a yacht, how to buy their fifth house. We believe that they can pay minimally 1% a year or a 5% lump sum," she told reporters Monday.
The campaign for the ballot initiative, led by the union, estimates the cuts to California's healthcare system would be $100 billion in the next five years because of the One Big Beautiful Bill Act and its consequences. "This initiative is a dollar-for-dollar solution," said Jimenez.
The GOP's sweeping 2025 tax and spending package turbocharged a shift that's been happening since the pandemic. More Republican-leaning states have been focusing on lower, more simple income-tax bills. Meanwhile, legislators in Democratic-leaning states have set their sights on tax hikes for their high-end residents. Blue states appear to be doubling down on tax increases to manage the cuts from the bill, while red states are taking the GOP's tax-cut ethos in stride.
"In general, we are seeing a divergence in state tax policies," said Lucy Dadayan, principal research associate at the Tax Policy Center.
In Washington state, lawmakers already passed a 9.9% income tax on millionaires, while Maine recently enacted an extra 2% income tax on households earning over $1 million.
Now the idea of a "pied-à-terre" tax for New York City is bouncing around in the Empire State. The tax would target homes, co-ops and condominiums that are valued above $5 million when the owner's primary residence is elsewhere.
Then there's a counter-movement shaping up to cut taxes and flatten out the rates and complexity - and it's typically unfolding in the Republican-leaning states.
Missouri is one step closer to ending its state income tax. Later this year, voters will decide whether the legislature can broaden and increase sales taxes in order to end the state's income tax. Last year, Missouri ended taxes on capital gains in the state.
There are now nine states without an income tax, including Florida and Texas. Washington now is somewhere in between, with no income tax for most people, but income taxes pointed at the top of the ladder.
In 2015, there were eight states with flat income-tax rates, an approach that's found more in Republican-leaning states. That's roughly doubled, rising to 15 states at the start of the year, according to Dadayan's data.
In 2015, there were two states with tax brackets specifically for millionaires; there are now seven - California, Massachusetts, Maryland, New Jersey, New York, Maine and Washington. The popular votes in each of those seven states favored Kamala Harris in the 2024 presidential election.
The One Big Beautiful Bill Act could be forcing state lawmakers to make tough decisions as they decide which side to take in the growing tale of two tax codes, Dadayan said. States can cut their services for residents or try filling the gap with more tax dollars from elsewhere - including the richest residents, Dadayan said.
The split boils down to a divergence on philosophy, said Andrew Wilford, director of state policy at the right-leaning National Taxpayers Union Foundation. The divergence is between states focused on gaining more revenue now - often by tapping rich households - and states that want to compete as destinations for residents in the future.
He sees it as a choice between planning for the future, or "do we want to drive them out because we want a one-time sugar high?"
To be sure, not all Democrats support higher taxes on the richest residents. For example, California's Democratic Gov. Gavin Newsom is against the billionaire's tax. At the same time, Rep. Ro Khanna, Democrat from California, co-sponsored a bill with Sen. Bernie Sanders of Vermont to install an annual wealth tax in the federal tax code.
Anecdotes or exodus?
The California ballot measure is worded to apply to residents as of Jan. 1, 2026.
At the end of 2025, there was a flurry of high-profile moves out of the state. Billionaires such as Google $(GOOGL)$ $(GOOG)$ co-founders Sergey Brin and Larry Page scooped up Florida real estate and residences. Thiel Capital, the private investment firm founded by Peter Thiel, announced it was opening a Miami office. The Dec. 31 announcement noted that Thiel had set up "a significant presence in Miami over the last several years." Meanwhile, Nvidia (NVDA) CEO Jensen Huang has previously said he's "perfectly fine" with the tax.
In a comment to the New York Times, Brin said he "fled socialism with my family in 1979 and know the devastating, oppressive society it created in the Soviet Union. I don't want California to end up in the same place."
The question is whether the California exits are isolated anecdotes, or a sign of an exodus. Backers of the wealth tax say it's not going to lead to mass migration out of California. "Folks don't leave the state that they are from," Jimenez said. The ballot-measure campaign estimates there would be approximately 200 households subject to the tax.
There's research to suggest that billionaires wind up in states without estate taxes, especially as they age.
California is one of the many places without a state-level estate tax. The GOP tax bill prevented the federal estate-tax exemption from falling. The gift and estate-tax exemption is $15 million per person this year.
But tax bills are not the top determining reason why people move in and out of states, Dadayan said. Weather, job opportunities and proximity to family are also part of the calculus, she said.
Many of the places that are picking up the most residents, however, also happen to be states with no taxes, or low and flat ones, according to Internal Revenue Service data.
Texas, Florida, North Carolina and South Carolina were the top four states gaining income-tax filers from 2022 to 2023, according to an analysis from the Tax Foundation. Texas and Florida lack a state income tax.
Among the biggest losers were New York, which shed approximately 72,000 filers in 2023. Illinois and New Jersey shed more than 28,000 and almost 20,000 respectively. At the top of the list was California, losing more than 100,000 income-tax filers that year.
-Andrew Keshner
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(END) Dow Jones Newswires
April 27, 2026 20:56 ET (00:56 GMT)
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