California’s billionaires may be on the hook for a one-time 5% tax on their net worth to help the state fund health care for low-income residents after sweeping federal cuts to Medicaid—a move that could generate about $100 billion in revenue but potentially shake up the local housing market’s luxury segment.
Last week, the Service Employees International Union, which represents some 2 million workers across 100 occupations, proposed a ballot initiative to impose the wealth tax on roughly 200 Californians with a net worth of $1 billion or more.
“These billionaires pay less than 1.5% of their total wealth in annual state taxes, according to economic estimates—a small fraction of what other Californians pay,” reads the proposed 2026 Billionaire Tax Act, with its authors arguing that it is “designed to make the State tax system more equitable.”
California is home to more billionaires than any other state, who together hold roughly $2 trillion in wealth. Among them are four of the world’s wealthiest people: Meta’s Mark Zuckerberg, Nvidia’s Jensen Huang, and Alphabet’s Larry Page and Sergey Brin, according to the Bloomberg Billionaires index.
This quartet of tech titans alone has an estimated combined net worth of $840 billion. If taxed at 5%, the foursome could contribute $40 billion to California’s coffers to help fill the state’s Medicaid and school funding shortfall.
Emergency tax to save health care funding
Supporters of the initiative sent a letter to state Attorney General Rob Bonta last Wednesday seeking approval to start collecting signatures. The tax proposal must receive more than 870,000 signatures by next spring to be placed on the ballot in November 2026.
Proponents are framing the effort as an “emergency” measure “to prevent the collapse of California health care.”
The bulk of the revenue expected to be generated by the tax would go toward health care, with 10% set aside to help fund K-12 public schools.
The California Budget and Policy Center, a local think tank, estimated that the state could lose $30 billion in federal funding a year for Medicaid, potentially leaving as many as 3.4 million people without medical insurance.
Should the tax proposal pass, the Golden State’s top earners would be required to pay the tax for the 2026 tax year, with the revenue replenishing the budget beginning in 2027, reported the Associated Press. The 5% net wealth tax could be paid over five years with interest.
To prevent billionaires from exploiting loopholes, the law is written to calculate their net worth based on their worldwide assets, including stocks, trusts, real estate holdings, art, and interest in private companies, so moving those assets out of California won’t let them avoid the tax bill.
The only way billionaires could escape the levy is if they leave the state before New Year’s Eve 2025.
While the tax is described as a one-time measure, opponents say it could send billionaires, many of whom are major job creators, fleeing the state and taking their businesses with them, following in the footsteps of the world’s richest person, Tesla founder Elon Musk, who moved from California to Texas during the COVID-19 pandemic.
What will it mean for the housing market?
Unsurprisingly, California’s billionaires have impressive real estate holdings made up of ultraexpensive properties.
Zuckerberg, 41, whose net worth currently stands at $260 billion, making him the world’s third-richest person, has bought up 11 properties around Palo Alto, CA, in the heart of Silicon Valley over the past decade. He has cobbled together a $110 million compound, which is currently under construction.
Brin, the 52-year-old co-founder of Google and Alphabet with $212 billion to his name, has been reported to own a $35 million Malibu, CA, estate that he picked up in 2022.
Meanwhile, Huang, 61, the world’s ninth-richest person with a net worth of $162 billion, has reportedly spent roughly $55 million on piecing together an impressive real estate portfolio, which is said to include a $38 mansion on San Francisco’s Gold Coast and a $6.9 home in Los Altos Hills near Nvidia’s headquarters, according to Mansion Global.
The proposed tax targeting California’s billionaires raises the question of what will happen to the rarefied segment of the real estate market accessible only to the super-rich.
“If this wealth tax was approved, it would certainly disincentivize the wealthy to live in California, and we would see many more relocate to no-income tax states,” Cara Ameer, a real estate broker at Coldwell Banker, tells Realtor.com®.
Ameer notes that many high net worth individuals have already moved from California to Nevada, Florida, Texas, and Tennessee in search of better tax climates.
“If you look at what is happening in those states, the wealthy are transforming the economic landscape of entire areas from business opportunities, elevated property values, substantial redevelopment, and renovation, along with consumer trends that have shifted to meet the needs of a more demanding clientele,” she says.
According to the agent, the richest 1% in California have been “on their way out” for years due to the high tax rate and elevated cost of living, and she believes the proposed tax may be the final straw for many of them.
“This could cause a lot of wealthy owners to unload their real estate portfolios, creating a glut of luxury properties,” she predicts. “There wouldn’t be much incentive for a wealthy person to relocate into California unless the state government came up with something to offset this 5% wealth tax, so these properties could stack up, creating a buyer’s market and could lose value.”
However, Realtor.com senior economic research analyst Hannah Jones predicts that the impact from the tax on California’s housing market would likely be limited.
“Levying a one-time 5% tax on California’s billionaires could make the state less attractive for these ultrahigh net worth individuals, but likely will not lead to a mass exodus,” she says. “Areas with a high concentration of properties owned by billionaires could see homeowners choose to list their home for sale or change their residency status to duck under the measure before it takes effect.”
Jones says the tax could even open up some inventory in tight ultrawealthy enclaves. At the same time, there is a chance the uncertainty created by the ballot initiative could stall transactions, widen the gap between asking prices and offers, and reduce construction starts aimed at wealthy buyers.
As for the entry-level to midlevel housing in California, the analyst says the new tax is unlikely to affect that sector in any significant way.
Attorney General Bonta is expected to release an official summary of the tax proposal for circulation in the coming weeks.
But even if the tax ends up on the ballot next year, there is no guarantee it will be adopted.
Last year, a bill seeking to impose a 1.5% annual tax on billionaires failed in the California Legislature, with Gov. Gavin Newsom, a Democrat, speaking out against the measure.
