A proposed billionaire tax in California could have fiscal consequences that extend well beyond the state’s wealthiest residents, with potential implications for state budgets nationwide in the years ahead.
J.P. Morgan Private Bank published an analysis examining how state budgets are driving new wealth tax proposals, with California’s ballot initiative the most advanced example.
The proposals target a narrow group of ultra-wealthy residents, but the programs they fund serve millions of families across healthcare, education, and food assistance.
While Congress faces steep constitutional barriers to a federal wealth tax, statehouses from Sacramento to Olympia are bypassing that debate entirely.
California’s billionaire ballot measure heads to a November vote
The 2026 Billionaire Tax Act has qualified for California’s November election after supporters collected more than 980,000 valid signatures, the California Secretary of State confirmed in June 2026.
The measure would levy a one-time 5% tax on net worth exceeding $1 billion for anyone who was a state resident on January 1, 2026, under the 2026 Billionaire Act.
Asset values would be measured as of December 31, 2026, and the tax would cover stocks, bonds, private business interests, art, collectibles, and intellectual property.
Real estate and most pension assets fall outside the net worth calculation, the initiative text filed with the Attorney General’s Office confirmed.
Taxpayers could spread payments over five equal annual installments starting in 2027, with a 7.5% annual deferral charge applied to any unpaid balance.
Revenue would be split, with 90% directed toward health care programs, including Medi-Cal and 10% toward food assistance and education, according to the California Secretary of State’s ballot summary.
A May 2026 PPIC survey of likely voters found 54% support for the measure, though an earlier January 2026 Mellman Group poll, funded by high-net-worth opponents, showed 48% support, which dropped to 46% after voters heard arguments from both sides.
Washington, Maine, and other states target high earners
California’s initiative carries the highest profile, but it is far from the only state-level action that high-net-worth taxpayers face as they head into 2027.
Washington state enacted a 9.9% income tax on households earning above $1 million per year in March 2026, marking its first tax on ordinary wage income, applying to an estimated 21,000 top-earning households and adding to a 7% capital gains tax that took effect in 2022, J.P. Morgan’s analysis noted.
More Personal Finance:
- Bank of America offers a critical debt elimination plan
- Fidelity challenges long-standing retirement savings rule
- Gallup data expose record financial anxiety in the U.S.
The law takes effect on January 1, 2028, with first payments due in April 2029 from roughly 21,000 filers. Before passing it, Washington lawmakers considered a wealth tax proposal on financial assets at rates ranging from 0.5% to 1%.
In April 2026, Maine enacted a 2% surcharge on income above $1 million for single filers and $1.5 million for joint filers, bringing the effective top marginal rate to 9.15%. Illinois considered a tax on billionaires’ unrealized capital gains in 2025, but did not pass it.
Constitutional barriers keep a federal wealth tax off the table
J.P. Morgan does not expect Congress to consider any federal wealth tax seriously for at least the next two and a half years.
The Constitution prohibits the federal government from imposing direct taxes unless they are distributed in proportion to each state’s population.
The 16th Amendment, ratified in 1913, allows Congress to tax income, but whether unrealized gains qualify under that definition remains an open legal question.
Capital gains taxes have historically been collected only when a taxpayer sells an asset, and J.P. Morgan expects any federal wealth tax to face immediate constitutional challenges in court.
Billionaire departures could cost California billions in lost revenue
Even before California’s initiative reached the ballot, some of the state’s wealthiest residents began relocating to lower-tax states, the California Tax Foundation reported in April 2026.
Nine publicly identified billionaire departures have already created a $2.77 billion recurring annual loss in state tax revenue, according to Jared Walczak’s study.
Jared Walczak, a senior fellow at the Tax Foundation, projects total ongoing revenue losses between $3.53 billion and $4.49 billion per year from the exodus.
“Actual out-migration almost certainly already exceeds that which has been publicly reported, and continued departures should be expected should the initiative advance,” Walczak noted.
Actual out-migration almost certainly already exceeds that which has been publicly reported, and continued departures should be expected should the initiative advance
Gov. Gavin Newsom, a Democrat, has publicly opposed the ballot measure and warned it could push startups and long-term business investment out of the state. “The evidence is in. The impacts are very real,” Newsom told Politico in a January 2026 interview.
Domicile rules have growing weight for high-net-worth taxpayers
“Everyone thinks that if they spend 183 days in another state, you’re domiciled in that state. That’s not necessarily true,” said Jere Doyle, a senior estate planning strategist at BNY Wealth, in a report published by CNBC.
Each state applies its own criteria, and factors such as voter registration, vehicle titles, and medical records are all important in state tax audits.
California’s ballot measure includes provisions targeting assets transferred out of state, which could trigger lawsuits over taxes owed by former residents.
J.P. Morgan’s analysis noted that estate planning strategies may need to be revisited before the November vote for taxpayers splitting time across multiple states.
Texas voters moved in the opposite direction in 2023, approving a constitutional ban on wealth taxes by a margin of 67.89% to 32.11%, Ballotpedia reported.
The result is a fragmented landscape in which your tax exposure depends not just on where you live, but on when you moved, how completely you severed ties, and what your former state can still claim.
Related: J.P. Morgan sees tax change uncertainty reshaping wealth plans
