Zucman and Rauh Clash Over California Billionaire Tax

Two leading economists have released conflicting analyses regarding the fiscal impact of California’s proposed billionaire wealth tax.

Gabriel Zucman, a professor at UC Berkeley and the Paris School of Economics, co-authored a report estimating that Proposition 40 would generate approximately $100 billion for the state. The proposal imposes a one-time 5% tax on the net worth of individuals who were California residents on January 1, 2026. Zucman calculated this figure by applying the rate to his estimate of $2.3 trillion in total billionaire wealth in the state, then reducing the amount by 10% to account for avoidance and evasion. The revenue would be allocated primarily to healthcare for low-income residents to offset federal Medicaid cuts.

Joshua Rauh, a Stanford economist and senior fellow at the Hoover Institution, offers a sharply different view. In an analysis co-authored with Benjamin Jaros, Rauh argues the tax could actually cost California $39 billion. He contends that at least seven prominent figures, including Larry Page, Sergey Brin, and Peter Thiel, successfully ended their residency before the cutoff date. Rauh claims these departures alone reduced potential revenue by around $30 billion. He further predicts that legal challenges and asset migrations will drain more funds than the tax collects. Some megabillionaires have already moved out of the state since the proposal was announced in late October 2025.

Zucman disputes the notion that recent movers are beyond the tax's reach. He argues that a simple change of address does not constitute a legal break in residency, citing the short two-month window between the proposal's announcement and the January 1 deadline. He points to Google co-founder Sergey Brin, who moved to Nevada but continues to commute to Silicon Valley for work. Zucman believes legal experts he consults consider it unlikely that such individuals successfully severed their California tax ties. He notes that past wealth taxes in other countries often failed due to loopholes or high migration rates, but he believes Prop 40's design addresses these issues by taxing business holdings and applying retroactively to a fixed date.

The debate also hinges on legal precedent. Rauh warns that the tax's retroactive nature and its application to worldwide assets may face successful constitutional challenges from a conservative Supreme Court. Zucman acknowledges that historical wealth taxes have often been viewed as failures but argues that recent studies, such as one on Norway, show that revenue gains can survive moderate increases in taxpayer migration. The superrich have poured $333 million into a campaign group aiming to defeat the measure, according to a recent New York Times report.

California voters will decide on Proposition 40 on Election Day. If approved, the state would implement the first wealth tax of its kind in the United States. The outcome could influence tax policy discussions at the federal and international levels. Zucman sees a potential victory as the start of a global movement to tax the superrich, while Rauh views it as a risky experiment that may shrink the state's tax base.