California's controversial wealth tax proposal is causing a stir among billionaires, leaving them with limited options to avoid paying. The Billionaire Tax Act, set to be on the state's general election ballot in November, imposes a one-time tax of 5% on the total wealth of California residents with a net worth of $1 billion or more. What's more intriguing is the special provision that makes it highly unlikely for anyone wanting to leave the state to avoid paying, according to tax attorneys. The retroactive date of Jan. 1, 2026, gives billionaires little time to change their tax residency after they first learned of the potential tax in December. This aggressive timeline has invited legal challenges and raised questions for California tech founders and investors about how to plan a quick move to a lower-tax state before a big liquidity event or company sale. California's rules around tax residency are complex, and changing residency or claiming non-residency for tax purposes can trigger a second set of rules. With artificial intelligence driving a new wave of wealth creation in California, tax advisors are seeing a flood of new business even before the proposed wealth tax. The Service Employees International Union-United Healthcare Workers West, which is backing the bill, says the proposed start date ensures that billionaires can't avoid responsibility by moving their assets or claiming residency elsewhere. However, the aggressive timeline and retroactive provision make it a certain target for lawsuits, and wealthy Californians are planning to leave this year to avoid the tax.
