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Californians will face two competing tax measures this November. The first is the Billionaire Tax Act, a one-time, 5% levy on the accumulated net worth of the state’s richest residents. Lesser known is the Retirement and Personal Savings Protection Act, which would draw constitutional lines around what Sacramento can and cannot tax, prohibiting new levies on retirement accounts, personal savings and individually owned assets and banning retroactive taxation.
Everyone with even just a little bit of money set aside — not just the California billionaires targeted by the wealth tax — should understand what these two measures represent.
Start with the Billionaire Tax Act. The gap between what it promises and what it would deliver is stark. Joshua Rauh of Stanford University has run the numbers with his Hoover Institution colleagues, and the results cast doubt on the prospect of any revenue gain whatsoever.
Proponents claim the tax would raise $100 billion. Rauh’s team found that billionaires have already been voting with their feet: Larry Ellison left California in 2020, and six others, including Google co-founders Larry Page and Sergey Brin, departed between the proposal’s announcement and Dec. 31, 2025 — the day before the liability would take effect.
These departures alone reduce the measure’s supposed tax revenue by nearly 40% before a single dollar is collected. Once migration patterns uncovered in the academic literature are applied to quieter departures, expected revenue falls to only $40 billion.
Now, factor in the normal state taxes that will no longer be collected from departing billionaires. Rauh’s team calculates that by shrinking the existing tax base, the measure’s “net present value” is at least a $25-billion loss for California.
Then there is the retroactivity problem. The proposal aims to tax billionaires based on residency and conduct that reaches back to Jan. 1, long before any vote was cast. Individuals who believe they lawfully established residency elsewhere might have to fight California in court for years (at the expense of the remaining taxpayers), based on details as arbitrary as where these billionaires kept their pets or held club memberships.
The “one-time” framing of the tax deserves equal skepticism. As Rauh points out, the measure includes a constitutional authorization to lift California’s cap on taxation of intangible personal property. Once that legal infrastructure exists, future wealth taxes can be imposed at any rate, at any threshold, at any time. It is, in other words, a permanent new power for the state.
The Billionaire Tax Act is so erratic and its precedent so problematic that it practically begs Californians to pay attention to the second ballot measure. All Americans’ savings should be safe from such confiscation based on three clear principles.
First, fairness: When a worker sets aside after-tax income to invest for retirement, the resulting balance is not untapped revenue. To treat this savings as a fresh tax base is to tax the same dollar twice.
Second, stability: A tax system that reaches into asset values rather than income flows is inherently volatile. A founder whose stock drops 40% in a downturn still owes wealth tax on last year’s greater valuation. An ordinary saver whose 401(k) is taxed would face the same absurdity.
Third, and most urgent, is California’s own track record. According to the state’s nonpartisan Legislative Analyst’s Office, state spending is poised to grow by nearly 70% between 2019 and the coming fiscal year, drastically outpacing a significant revenue hike over the period. The result is a cumulative deficit exceeding $50 billion over the next two years, a hole entirely of Sacramento’s own making, unrelated to Washington. Trusting politicians with that spending record to stop at taxing billionaires is reckless and naive.
When the wealth tax inevitably fails to deliver, the state will look for the next available pool of assets. Non-billionaires who remain after California’s billionaires depart will be the likely targets, and their retirement savings could be the new tax base. As Rauh wrote earlier this month in his ongoing exploration of the proposals, “While approximately 0.001% of California households are billionaires, approximately 62% have retirement accounts.”
If this prediction sounds far-fetched due to federal protections — or if you think billionaires will always be treated differently than normal savers who fill retirement accounts over a lifetime — consider what California already does to health savings accounts (HSAs).
Federal law treats HSA contributions and earnings as tax-exempt. But under California’s tax engineering, the interest, dividends and capital gains are treated as ordinary income, affecting roughly 4.5 million residents. These people are not billionaires or millionaires. Politicians simply decided this was revenue the state was entitled to tax. Doing the same with 401(k)s and IRAs would not require new principles, just the same willingness.
A wealth tax on billionaires is the first step, and it puts the retirement savings of ordinary Californians at risk. The HSA precedent suggests that the threat is real. The Retirement and Personal Savings Protection Act would erect constitutional barriers against exactly that kind of expansion.
Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. This article was produced in collaboration with Creators Syndicate.
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Ideas expressed in the piece
The piece argues that the proposed Billionaire Tax Act, a one-time 5% tax on the net worth of California billionaires, will fall far short of its advertised $100-billion revenue target because wealthy residents are already leaving the state and will continue to migrate if the measure passes, shrinking the broader tax base and potentially producing a net long‑run revenue loss.
It emphasizes that the tax’s retroactive design, by tying liability to residency and asset values dating back months before voters actually approve it, would invite years of costly litigation over who is truly a California resident, with disputes hinging on details such as where people keep pets or hold club memberships, and those legal costs would ultimately be borne by remaining taxpayers.
The article contends that calling the levy a “one-time” wealth tax is misleading, because the measure includes constitutional authorization to remove existing limits on taxing intangible personal property, thereby giving the state a permanent new power that future lawmakers could use to impose broader wealth taxes at different rates, thresholds and times.
It maintains that taxing accumulated savings and asset values rather than income flows is fundamentally unfair and unstable: when workers save after paying income tax, treating those balances as a fresh tax base amounts to double taxation, and when markets fall, taxpayers would still owe tax based on past, higher valuations, creating cash‑flow problems for both entrepreneurs and ordinary savers.
The column links its criticism of the wealth tax to California’s fiscal track record, stressing that state spending has grown much faster than revenues and helped create a large deficit; given this history, the piece suggests it is naive to assume lawmakers will stop at taxing billionaires once the new authority exists.
It warns that if the wealth tax fails to deliver promised revenue, politicians will likely turn to the “next available pool of assets” by extending similar taxes to non‑billionaires’ retirement accounts and personal savings, arguing that the same legal and moral logic used to tax billionaires could readily be applied to 401(k)s, IRAs and other household assets.
To support that concern, the article points to California’s existing decision to tax earnings in health savings accounts even though federal law treats HSAs as tax‑exempt, noting that millions of residents already see HSA interest, dividends and capital gains taxed as ordinary income, and presenting this as evidence that state officials are willing to tax savings vehicles used by ordinary households.
On that basis, the piece urges voters to support the Retirement and Personal Savings Protection Act, which would place constitutional limits on what Sacramento can tax by prohibiting new levies on retirement accounts, personal savings and individually owned assets and by banning retroactive taxation, framing it as a needed safeguard for anyone with money set aside, not just billionaires.
Different views on the topic
Labor and healthcare advocates describe the Billionaire Tax Act as a necessary, targeted response to looming funding shortfalls, arguing that the measure would raise roughly $100 billion from the state’s richest residents to avert cuts to Medi‑Cal, protect hospital services and invest in healthcare workers, while explicitly sparing middle‑class taxpayers and patients from higher taxes.[1]
Tax policy researchers at the Institute on Taxation and Economic Policy project that the wealth tax can realistically raise about $100 billion over five years from roughly 200 of the wealthiest Californian taxpayers, contending that past evidence shows only modest migration responses among ultra‑rich households and that, even accounting for some relocation, a well‑designed wealth tax can generate substantial, reliable revenue and meaningfully reduce extreme wealth concentration.[3]
These analysts also argue that focusing on a very small group of ultra‑wealthy households limits volatility concerns, since the tax is based on diversified portfolios and business interests rather than ordinary retirement accounts, and they note that tools such as multi‑year averaging, payment plans and careful valuation rules can mitigate the cash‑flow and market‑cycle issues highlighted by critics.[3]
Supporters and legal experts emphasize that the initiative’s text applies the tax only to individuals whose net worth exceeds the billion‑dollar threshold and who are California residents in 2026, stressing that the measure itself does not impose an ongoing annual wealth tax on all personal assets, but instead authorizes a one‑time levy on the very richest households.[4][6]
Some legal scholars involved in or familiar with the drafting of the Billionaire Tax Act describe it as crafted to fit within existing constitutional constraints, arguing that, while innovative, it is not a lawless “confiscation” of savings but a progressive tax targeted at assets held by the ultra‑rich, and suggesting that the design reflects lessons from other jurisdictions’ experiences with wealth taxation.[5]
Commentators following the initiative process note that earlier versions contained more aggressive language about reaching back to those who left the state before 2026, but that this retroactive language was removed in a November 2025 amendment, with the current proposal tying liability to residency in 2026, undermining claims that the measure is primarily a retroactive grab at past conduct.[6]
Progressive tax groups and some public finance experts caution that broad constitutional bans on taxing categories such as retirement accounts or personal savings, like those envisioned in the Retirement and Personal Savings Protection Act, could permanently limit California’s ability to adapt its tax system, constrain future efforts to address inequality and underfund public investments, and entrench advantages for high‑wealth households relative to other residents.[3]
Advocates for the wealth tax argue that fears of an inevitable expansion from taxing billionaires to taxing ordinary savers are speculative, pointing out that the initiative is drafted to apply only to a tiny fraction of households and that California’s separate income‑tax treatment of HSAs reflects longstanding choices about conformity with federal law rather than a stealth plan to tax 401(k)s or IRAs.[1][3]
Political analysts observing early polling note that a majority of likely California voters currently say they are inclined to support the Billionaire Tax Act, interpreting this as evidence that many residents see taxing billionaires’ accumulated wealth as a fair way to fund public services and stabilize state finances, even as critics raise concerns about economic side effects and implementation challenges.[2]
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