The proposed California Wealth Tax is prompting significant reactions, with one prominent Los Angeles billionaire, Don Hankey, recently purchasing a $21 million penthouse in Nevada. This move, a direct response to the proposed California Wealth Tax, highlights growing concerns among the state’s wealthiest individuals. Hankey, a lifelong California resident, is reacting to a tax targeting the state’s wealthiest individuals, a one-time 5% levy on assets of billionaires residing in California as of January 1, 2026. The introduction of the California Wealth Tax is a contentious issue.
Hankey calls the proposed California Wealth Tax “ridiculous” and believes it will drive more wealthy people out of California, contributing to a potential tax exodus California is already experiencing. The tax aims to raise significant funds for public services, with supporters citing the need to fund healthcare and education programs amidst looming federal funding cuts. The initiative is gathering signatures for the November 2026 ballot, centering discussions around the implications of a California Wealth Tax.
Nevada’s Tax Appeal and the California Wealth Tax
Nevada offers a stark contrast in tax policy, making it an attractive alternative to states like California facing the prospect of a California Wealth Tax. It has no state income tax, a major draw for high-earners considering a move. California, by contrast, has the highest state income tax rates in the country. Nevada also lacks corporate income tax, and property taxes are generally lower. For instance, a household earning $600,000 could save an estimated $70,000 annually in taxes by living in Nevada versus California. This tax-friendly environment, especially in contrast to a potential California Wealth Tax, makes Nevada a haven for wealthy individuals tax planning.
The Proposed ‘Billionaire Tax Act’ and the California Wealth Tax
The “2026 Billionaire Tax Act” is a proposed ballot initiative that would impose a 5% tax on the net worth of billionaires, directly impacting those subject to the California Wealth Tax. The tax applies to assets held by California residents on January 1, 2026. This retroactive nature means moving away after that date may not fully exempt individuals from the proposed California Wealth Tax. The tax is intended to generate around $100 billion over five years, a significant sum proponents hope to harness.
However, critics raise concerns about the California Wealth Tax‘s complexity. It includes intricate valuation rules for businesses and targets unrealized gains, a point of contention. Some experts suggest the actual tax rate could be higher than 5% due to its design. The state’s Legislative Analyst’s Office predicts potential long-term decreases in state income tax revenues, raising questions about its ultimate California economic impact and the viability of the California Wealth Tax.
A Wave of Departures Fueled by California Wealth Tax Concerns
Don Hankey is not alone in his decision to explore alternatives to the looming California Wealth Tax. Several high-profile figures have relocated or are considering it. Google co-founders Larry Page and Sergey Brin have been linked to moves to Florida and Nevada, seeking to avoid the financial implications of a California Wealth Tax. Venture capitalist Chamath Palihapitiya warns of a massive wealth exodus, estimating California has already lost $1 trillion in wealth. Other notable figures like Larry Ellison and Elon Musk have also left the state, partly due to the challenging state tax policies and the threat of a California Wealth Tax.
Official Reactions and Implications of the California Wealth Tax
California Governor Gavin Newsom opposes the proposed California Wealth Tax, fearing it will create a competitive disadvantage for the state. Newsom has called the proposal “damaging” and “bad economics”, and plans to work against its passage. The push for the initiative is largely driven by the Service Employees International Union–United Healthcare Workers West, advocating for the benefits a California Wealth Tax could provide for public services.
The potential departure of billionaires, exemplified by the Don Hankey Nevada move, raises concerns about a “brain drain”. It could impact jobs, investment, and the state’s overall economic growth. For Los Angeles, this exodus could mean a loss of vital tax revenue, exacerbated by the prospect of a California Wealth Tax. The spotlight is now on California’s state tax policies, scrutinized for their effect on economic vitality and resident retention, especially in light of the proposed California Wealth Tax and the allure of Nevada tax advantages.
