Zucman and Rauh Disagree on $139 Billion Impact of California Wealth Tax

Gabriel Zucman and Joshua Rauh have published opposing analyses of California’s proposed billionaire wealth tax, known as Proposition 40. Zucman, an economist at UC Berkeley and the Paris School of Economics, estimates the tax will generate approximately $100 billion for the state. Rauh, a senior fellow at the Hoover Institution and Stanford economist, calculates the measure will cost California $39 billion.

The tax applies a one-time 5% levy on the net worth of anyone who was a California resident on January 1, 2026. It targets assets such as stocks, real estate, and luxury goods. Zucman argues that the current tax system allows the wealthiest individuals to accumulate assets without paying proportional income taxes. He states that taxing this wealth will reduce inequality and fund healthcare for low-income Californians, partially offsetting federal Medicaid cuts.

Zucman and his co-authors, Jasper Boll and Emmanuel Saez, based their $100 billion figure on an estimated $2.3 trillion in total wealth held by California billionaires as of mid-2026. They reduced the projected revenue by 10% to account for potential avoidance and evasion. In contrast, Rauh argues that the tax will trigger a mass exodus of wealthy residents, which will wipe out income tax revenue the state currently collects from them.

A primary point of contention is the residency status of seven high-profile individuals who moved out of the state before the January 1, 2026, cutoff. Rauh lists Larry Page, Sergey Brin, Peter Thiel, Don Hankey, Steven Spielberg, Travis Kalanick, and David Sacks as having left California. He claims their departures reduced potential tax revenue by roughly $30 billion. Zucman disputes this, arguing that legal experts believe these individuals likely failed to formally end their California tax residency in time.

The two economists also differ on the legal viability of the measure. Rauh contends that billionaires will file numerous constitutional challenges against the tax, particularly regarding its retroactive nature and its reach into assets held outside the state. He suggests the Supreme Court may strike down parts of the law. Zucman counters that past wealth taxes failed largely due to loopholes, such as exemptions for business assets. Proposition 40 closes these gaps by taxing business holdings and applying the fee retroactively to prevent last-minute moves.

The debate reflects a wider national conversation on taxing the superrich. Proponents of the tax have noted that the measure could establish a precedent for federal and international wealth taxation. Opponents point to the $333 million spent by pro-business groups to defeat the proposition. The outcome of the vote will determine if California proceeds with the first state-level wealth tax in the United States.