California, Washington wealth tax votes test capital flight risk
Voters in two of the largest US states will decide on sweeping taxes targeting the wealthy this November, offering a critical test of whether capital flight will outweigh progressive revenue goals.
California voters will consider the 2026 Billionaire Tax Act this November, a proposal to levy a 5% annual tax on the total wealth of residents holding over $1 billion in net worth. If approved as Prop 40, it would mark the first voter-approved wealth tax in US history. Crucially for investors, the tax applies to total wealth rather than realized income.
The original proposal estimates the measure would generate $100 billion in incremental revenue from the state’s more than 200 billionaires. However, independent analyses project a starkly different financial reality for California. One review forecasts a $24.7 billion loss for the state, driven by capital flight, updated asset definitions, and potential constitutional costs.
The structural design of the tax means certain founders could face liabilities far exceeding a flat 5% rate. According to the Tax Foundation, individuals like DoorDash’s Tony Xu and Alphabet’s Sergey Brin and Larry Page fall into this category due to how the proposal defines net worth. Governor Gavin Newsom opposes the measure over broader economic concerns, though some executives like Nvidia’s Jensen Huang have voiced support. Promarket warns the tax could create adverse market incentives and inequities.
Washington state offers a parallel test, but in reverse. Voters will decide whether to repeal a 9.9% income tax on earnings above $1 million that legislators passed in March 2026. Opponents gathered sufficient signatures to force the referendum after immediate signs of business relocation emerged. Starbucks announced plans to open operations in Tennessee with the aim of moving employees away from its Seattle headquarters.
The Washington debate also highlights the broader reach of such taxes beyond the ultra-wealthy. Critics point out that the 9.9% rate captures high-earning professionals like athletes, not just billionaires. Voters in both states must weigh whether a new layer of taxation will ultimately damage state finances by driving out the very taxpayers it aims to capture.
Together, California and Washington represent nearly 14% of the US population, making November’s results a de facto national referendum on wealth taxation. Successful passage would likely accelerate similar efforts in New York, Massachusetts, Illinois, and Oregon.
Conversely, defeat in these heavily Democratic states would provide powerful ammunition to opponents of wealth taxes. It would signal that even progressive voters fear revenue volatility and capital flight risks. Meanwhile, low-tax states like Texas, Tennessee, and Florida continue to position themselves as beneficiaries of any outbound migration, with Florida moving to significantly reduce property tax collections.
