Supporters of California’s proposed billionaire tax say it could raise about $100 billion. But a new paper puts the takings closer to $30 billion and warns that the state could ultimately lose money if its richest residents flee. Proposition 40, which goes before voters on November 3, would impose a one-time 5% tax on billionaires who were California residents on January 1, 2026, with their wealth valued at the end of the year. Most of the tax proceeds would go toward healthcare.

In a National Bureau of Economic Research working paper released this week, Stanford economists Benjamin Jaros and Joshua Rauh estimate the tax would collect between $28 billion and $36 billion — far short of supporters' $100 billion projection. They point to billionaires moving away before the residency cutoff. Their estimate also assumes legal challenges could prevent California from collecting some of the remaining tax. The authors identified seven billionaires reported to have left the state before the cutoff: Google cofounders Larry Page and Sergey Brin, investor Peter Thiel, director Steven Spielberg, Uber cofounder Travis Kalanick, investor David Sacks, and car loan tycoon Don Hankey.

Together, they accounted for nearly 30% of the wealth the researchers considered potentially taxable. The researchers noted that moving out of the state does not, by itself, settle someone's tax residency. The authors' bigger concern is what happens afterward. California would collect the wealth tax only once, but billionaires who leave could stop paying state income taxes year after year. If those departures and lost payments last, their model projects an average net loss of $38.9 billion. The researchers said they ran 100,000 simulations, and that in 85% of scenarios, losses outweighed revenues from the tax.

The forecast depends on who actually left and whether they stay away. California's nonpartisan Legislative Analyst's Office offers a less stark view.

It expects tens of billions in tax revenue and a possible ongoing drop of less than $1 billion a year in billionaire income-tax payments. Brin is fighting the proposal on another front, too. He has given at least $102 million to Building a Better California, a group backing efforts to defeat or block Proposition 40. Two competing measures on the same ballot could keep Proposition 40 from taking effect, even if voters approve it.

While some billionaires have been vocal in their opposition to the tax, some have welcomed it. Nvidia CEO Jensen Huang told CBS News last month that being able to pay an estimated $8 billion over five years would be a "privilege." In filings released this week, it was revealed that Meta CEO Mark Zuckerberg had considered moving out of California due to the tax, but ultimately decided to stay.

To ensure that Zuckerberg has sufficient liquidity to pay without diluting his control of the company, Meta created a new class of shares. Many economists back the plans. Six Nobel Prize winners — Daron Acemoglu, Abhijit Banerjee, Peter Diamond, Esther Duflo, Paul Krugman, and Joseph Stiglitz — signed a letter in September calling the proposal the "first opportunity for the people to start reining in the power of billionaires."

At the time, Acemoglu said it could counter years of tax avoidance by the very wealthy and curb their political influence. He said that while the proposal isn’t perfect, it "deserves support."