California billionaire tax drive collides with constitutional traps

California’s Billionaire – California voters in November will decide on the Billionaire Tax Act, a proposed one-time 5% tax on personal wealth above $1 billion—an effort built after President Donald Trump’s cuts created holes in the state Medicaid budget. Backed by proponents and pushed

On a ballot this November, California voters will be asked a question that sounds simple and lands like a thunderclap: should the state tax net worth at the top of the income pyramid?

The proposal—called the Billionaire Tax Act—would impose a one-time tax of 5 percent on personal wealth exceeding $1 billion. It was put forward by health workers after President Donald Trump “blew holes in the state Medicaid budget.”

Supporters say the public is already there. Polls cited in the push indicate majority support. But the response from the billionaire class has been swift and expensive. Tech oligarchs have threatened an exodus and have bankrolled competing measures with at least $118 million in funding. including $82 million from Google’s Sergey Brin. according to the Associated Press.

At the center of the effort is Brian Galle. a University of California. Berkeley law professor who helped write the initiative. He has also been involved in other federal attempts to tax the obscenely rich—bills that. as the initiative’s backers acknowledge. “seldom go anywhere. ” despite repeated evidence of broad public support.

A 2024 report from the Excessive Wealth Disorder Institute reviewed 56 national and state polls on redistributive proposals and found majority support for most. People favored surtaxes on incomes over a million dollars. They also wanted the wealthy to pay at least the rate on their investment gains as workers pay on their wages. The same polling found support for ending intergenerational dynasty trusts that grow untaxed in perpetuity. and for cutting the gift and estate tax exemption—which is currently $30 million—the amount a superwealthy couple can pass to heirs without paying a dime.

Direct wealth taxes drew some of the strongest backing. The report says roughly two-thirds of respondents favored them, including 51 percent of Republicans, for proposals like the Ultra-Millionaire Tax Act. That bill was first introduced in 2021 by Sen. Elizabeth Warren (D-Mass.) and again this year by Rep. Pramila Jayapal (D-Wash.). Its structure would place a 2 percent annual tax on net household assets exceeding $50 million, and 3 percent on assets over $1 billion.

Similar bipartisan support, the polling suggests, also runs to a cluster of proposals from Sen. Ron Wyden (D-Ore.), Rep. Steve Cohen (D-Tenn.), and others—efforts aimed at taxing unrealized gains on billionaires’ unsold assets. The pitch is blunt: these are paper profits that the IRS currently won’t touch.

But nowhere in Washington has any wealth tax cleared into law, and the obstacles are not only political. The challenge, Galle explains, is also constitutional.

In an interview with Galle described in the piece—he spoke over chocolate-infused green tea at an Oakland cafe—he frames the problem this way: the roadblocks aren’t just well-funded opposition. They are also the kinds of legal questions that can stop a federal program before it ever reaches enforcement.

As he puts it. even the income tax as the United States knows it wasn’t allowed until the 1913 ratification of the 16th Amendment. Before that. a federal tax on wealth would almost certainly be treated by the Supreme Court as a “direct tax.” The Constitution requires “apportionment” for direct taxes. meaning Congress would have to set the amount and then require each state to raise its share based on its portion of the population—not on where billionaires live.

That approach, Galle says, is unworkable. “A direct tax at the national level has to ride in on a unicorn,” he tells the author.

State-level taxes, however, don’t face the same “direct tax” rule. Every state already taxes wealth through property taxes. even if those systems often favor the rich—because the middle-class homeowner’s assets tend to be tied up in a primary residence. while a very rich family’s home usually accounts for a smaller slice of its total holdings.

Some states have also attempted “millionaire taxes.” DC and seven states have passed laws in that category; the latest is Washington. Under the Washington law described here. incomes up to $1 million would be taxed at zero. with 9.9 percent charged on each additional penny. Rep. Don Beyer (D-Va.) and Sen. Chris Van Hollen (D-Md.) introduced a federal version of that approach in March.

But taxes framed around realized income can miss the way ultrawealthy investors avoid income-tax bills by not selling.

In the piece. Harvey Dale. a New York University tax law professor who advises billionaire clients. explains the problem with what he calls the standard structure: “We don’t tax wealth. we tax income.” Ultrawealthy investors. he says. can avoid having very much income because they take low-interest loans against assets rather than cashing in by selling stock.

The scheme has a name: “buy, borrow, die.” Instead of selling for living expenses, investors borrow against their holdings. When they die, a “step-up in basis” rule lets heirs inherit unsold assets at market value, avoiding the 23.8 percent capital gains tax that their parents deferred until death.

Unrealized gains, as the article presents it, are essentially income—just one that doesn’t show up on paper until the stock is sold. Yet Congress has never moved to tax that kind of income, and the Roberts court has signaled it wouldn’t follow if asked.

The piece cites the Supreme Court’s 2024 ruling in Moore v. United States as a warning sign. Galle says he and others thought “there’s no way the Supreme Court’s going to say that income only gets measured at sale. ” but the court “made clear that it would do just that.” The takeaway given in the piece is that a federal tax on wealth or paper gains would likely require a constitutional amendment. which Dale says “seems to be something slightly below zero.”.

This is where California’s ballot question becomes more than a local policy fight—it becomes a workaround for a legal dead-end.

As the piece lays out. voters and lawmakers have been moving toward local solutions instead. including New York City’s pied-à-terre tax. which passed. and San Francisco’s “Overpaid CEO” ballot measure. which did not. Each time a city or state considers taxing concentrated wealth. fear follows—warnings that the “golden geese” will fly off to another city. state. or even country.

The article points to a Center on Budget and Policy Priorities analysis that complicates the panic: California already has the nation’s highest marginal tax rate, but has the second-lowest rate of out-migration among households earning more than $200,000.

Still, the question isn’t settled. Allen Prohofsky—who spent 15 years as the chief economist at California’s Franchise Tax Board—says he suspects the fear of billionaire flight is overhyped when it comes to the tax initiative. but he’s not sure. “If anybody tells you they’re sure they know what’s going to happen. ” he says. they are either lying or “delusional.”.

Prohofsky adds a line that lands differently than the usual campaign rhetoric: “The people who really hate, hate, hate taxes? Most of them have already left [California].”

The article describes where that dispute may become practical for individual billionaires. It notes that Brin. angered by the proposed billionaire tax. now says he spends just enough time across the border in Nevada to qualify as a resident. Prohofsky points out that the Franchise Tax Board has a special enforcement unit that may ask him to prove it.

David Sacks, Mark Zuckerberg, and Peter Thiel are also described as making moves toward leaving.

Yet both Prohofsky and Dale argue that for many wealthy Californians, departure isn’t a simple switch. Dale says leaving a state or country is “a very complicated and ultimately personal decision,” and that it “doesn’t blend down easily into something simple.”

And for at least one key element of this fight, time has already run out.

The piece says it is too late to flee the tax because it applies to any billionaire who was a California resident on January 1. 2026. Proponents calculate the state would gain about $100 billion. Opponents at the conservative Hoover Institution claim departures will ultimately cost California $25 billion.

Galle is described as having helped write a “thoughtful takedown” of the Hoover analysis, and the author reports Dale’s reported response by email as more succinct: “LOL.”

Another argument appears in the reporting: op-eds opposing the tax point out that California’s richest 1 percent account for nearly 40 percent of income tax revenues. The piece notes that this framing can be misleading because the billionaires targeted by the proposal are only a small sliver of that 1 percent. It also cites an estimate by Galle. UC Berkeley economist Emmanuel Saez. and two colleagues that California’s roughly 200 billionaires account for about 1 percent of state tax revenue.

Underneath the ballot fight sits a separate, deeper policy goal—one Galle says could matter even beyond the tax rate itself.

Brian Galle’s own “fair tax” proposal, the piece says, doesn’t touch wealth directly. Instead. it aims to eliminate “buy. borrow. die.” The approach is part of what he helped mastermind: a plan to tax unrealized gains constitutionally through a “fair share tax. ” described as on track to be introduced as a House bill this summer.

The proposal’s design. as outlined here. would apply only to households with more than $15 million in lifetime investment gains. targeting their realized unrealized gains. It is described as applying in a way that changes how holding assets for years works: normally. rich families pay a 23.8 percent tax on profits when they sell. and they can pay zero if they pass assets at death due to the “step-up” rule. Under Galle’s proposal. the tab would be substantially higher. calculated as if unsold stock appreciation were taxed every year. with interest tied to annual increases.

It also deals with inheritance in a way the piece says would make the tax burden follow the asset rather than the person: an heir can sell inherited stock or not, but “either way, someone eventually has to pay up—with interest.”

Because the tax is imposed only after income is realized. Galle is described as believing the approach would satisfy the Supreme Court. To make it fully effective. the piece says. it would need to apply to assets held in complex trusts—because every new rule. Dale warns. prompts a rush of loopholes by a workforce of $3. 000-an-hour lawyers.

The fight in California is therefore about more than one ballot measure and one election cycle. The initiative is being pitched as a way to collect money and rein in political and economic distortions created by concentrated wealth. But the facts laid out here also show why this fight is being staged at the state level in the first place—because federal courts and constitutional rules have made taxing wealth. and even paper gains. a much tougher lift.

And with the next deadline already locked in—California residency on January 1, 2026—the stakes have narrowed from theory to timing. For the voters, the question isn’t just whether to tax billionaires.

It’s whether California can move where Washington can’t—and whether the legal architecture of the country will keep rewarding the strategies that help the richest treat income as optional.

California politics Billionaire Tax Act net worth tax Sergey Brin Brian Galle Medicaid budget unrealized gains buy borrow die step-up in basis Moore v. United States Excessive Wealth Disorder Institute Warren wealth tax Jayapal Wyden Cohen Sanders Summer Lee Ron Wyden Steve Cohen Emmanuel Saez