California’s proposal to impose a one-time wealth tax on its wealthiest residents faces significant hurdles, and experts say its design is seriously flawed. According to the Wall Street Journal, while the tax aims to raise revenue from the state’s wealthiest, it highlights the broader economic risks associated with concentrated wealth.
The WSJ reports that the US economy is increasingly dependent on a small group of ultra-wealthy households. Their spending is largely tied to the performance of the stock market, raising concerns that a major market correction could have far-reaching effects on the broader economy.
California’s Billionaire Wealth Tax: What’s Proposed
California is considering a one-time 5% wealth tax on residents with a net worth of more than $1 billion to help fill budget gaps, particularly in health care funding after federal Medicaid cuts. Unions supporting the measure say it could raise about $100 billion if it goes to the ballot and is approved by voters.
The tax would apply to anyone who was a California resident on Jan. 1, 2026, even if the measure passes later.
Proponents say the ultra-rich should help prop up the systems that helped make their wealth possible.
However, the news site notes that the plan is “a long shot” and has several design and legal issues that make its passage and implementation uncertain.
Design issues
One of the key concerns identified by the rapporteur is the way the tax is calculated. According to the current proposal:
Wealth would be measured using the higher of billionaires’ voting rights or economic stake in the company — a rule that could unfairly hit tech founders who hold large voting stakes relative to their true economic holdings.
This could lead to outsized tax bills and even force founders to sell company stock to pay the tax, which could hurt local economies.
Will the billionaires leave? A real possibility
Another concern is that billionaires might move out of California rather than face the tax. There are already signs that this is happening:
Opponents warn that if the billionaires leave, California could lose future revenue and corporate tax revenue, along with jobs and investment.
The Wall Street Journal reports that this fear helped fuel opposition to the proposal among wealthier residents and business groups.
Why the wealth tax debate is important
The California ballot measure comes amid a growing debate about wealth inequality in the U.S. The Journal highlights data showing how much wealth is now held by the wealthiest households:
The richest 1% of households controlled about 32% of US wealth at the end of 2025 – a record high.
A much smaller group – the top 0.1% – held roughly 14.4% of the nation’s wealth.
Meanwhile, the bottom half of American households own a much smaller share of wealth, around 2.5%.
These numbers help explain why policymakers and activists are increasingly debating whether current tax rules allow billionaires to pay less relative to their wealth than wage-earning Americans.