Billionaires Make Plans to Avoid the California Wealth Tax

The NY Times is about two weeks behind the curve on this story at this point. They published a story Saturday titled “Move Your Picassos, Get a Divorce: Strategies for California Billionaires.” The headline really matches the tone of the story which is meant to mock the efforts of the very wealthy in California to avoid having their property seized and spent by a socialist teacher’s union.

At a waterfront resort in Newport Beach, Calif., a tax lawyer took the stage in a conference room this week to deliver some advice.

A couple hundred wealth advisers had gathered over boneless short ribs and striped bass to learn about a suddenly hot topic among the uber-rich: a proposed tax on California billionaires.

“What’s the first way to avoid the tax?” said Andrew Katzenstein, the luncheon speaker.

“Get divorced.”

Jokes aside, the article downplays and ignores the fact that several of California’s wealthiest people have already left the state in response to the tax. Here’s a list of the top 10 richest people in California generated by Google’s AI:

1. Larry Ellison ($362.6B): Founder of Oracle.
2. Mark Zuckerberg ($267.4B): Co-founder of Meta (Facebook).
3. Larry Page ($208.8B): Co-founder of Google.
4. Sergey Brin ($193.7B): Co-founder of Google.
5. Jensen Huang ($151.1B): CEO of NVIDIA.
6. Henry Samueli ($19.7B): Co-founder of Broadcom.
7. Eric Schmidt ($16.9B): Former CEO of Google.
8. Andreas von Bechtolsheim & family ($16.1B): Technology investor.
9. Jan Koum ($16.1B): Co-founder of WhatsApp.
10. Eric Smidt ($15.6B): CEO of Harbor Freight Tools.

There are two things to notice about this list. First, the top 5 are much richer than the bottom 5 on this list. Jensen Huang is #5 on the list and his wealth of $151 billion is nearly 8 times that of Henry Samueli who is #6 on the list.

The point is that if you imagine that list running to #200, which is about how many billionaires there are in California, most of them have a small fraction of the total wealth of those top 5 guys. In fact, if you add up all the wealth of all the California billionaires it comes to just over $2 trillion dollars, around $2.2 trillion. But those top 5 guys represent half of that money ($1.1 trillion). The other 195 or so billionaires on the list make up the other 50% of the total wealth held by billionaires.

So the second important point is that billionaires 1-4 have all left California. They have moved their primary residence to other states. Ellison, Page and Brin did this before the January 1 deadline set up by the new tax. Zuckerberg did not make the deadline but just bought a large home in Miami and is apparently headed there. Only Jensen Huang at #5 on the list has committed himself to staying in California regardless of the tax.

So the bottom line is that between those top 4 guys and several others who have left or are leaving, at least half the money the tax was meant to tax are gone. But instead of reporting on that, the Times is just pretending this is all a big joke, i.e. “get divorced.” And when it comes to describing why the tax will prevent people from fleeing, the Times sidesteps the fact that half the money is already gone. This whole passage is just surreal in its inability to acknowledge the facts. [emphasis added]

The architects of the tax proposal are confident that they have made it hard to maneuver around. Backers applied the tax to any billionaire who was a California resident as of Jan. 1, 2026. The proposal also attempts to tax unrealized gains, as well as wealth held in trusts, which the ultrawealthy have successfully used to reduce what they owe in federal estate tax.

No tax is airtight. Proponents expect that about 10 percent of the potential revenue would be lost to avoidance and evasion, which they see as a relatively low rate.

“Every tax has leakages, and especially every tax on the wealthy,” said David Gamage, a University of Missouri law professor who helped write the union’s tax proposal. “There’s lots of existing taxes where the leakage is much higher.”

Again, they’ve already lost 50% of the potential revenue. Why is the NY Times failing to point that out? Why aren’t they pressing David Gamage to explain how he is going to tax Sergei Brin and Larry Page when they appear to have already beaten the Jan. 1 deadline? The story then goes on to mention a bunch of other loopholes which even those who don’t leave the state will be able to use.

The law’s year-end determination of net worth also gives billionaires time to shift their wealth. Mr. Katzenstein focused on the remaining window during his presentation at the conference organized by the Society of Trust and Estate Practitioners of Orange County…

He suggested moving valuable art work to homes in other states because the Billionaire Tax Act says personal property will not count toward net worth if it is outside of California for at least 270 days this year…

And billionaires without an Aspen house might think about purchasing one this year, since personal real estate is exempt from net worth for wealth tax purposes, Mr. Katzenstein said.

Any kind of realistic assessment of this would suggest that it has already been a disaster for the state. This was supposed to take in $100 billion all at once, which is about 5% of that $2 trillion in total wealth held by California’s billionaires. But at this point the wealth taxers will be lucky to come up with half of that amount. In fact, half is probably optimistic because the state will not win all the lawsuits it has to file for compliance.

None of this is a big secret. In fact, even Gov. Newsom has been saying this plan is a disaster for a month now, but the NY Times is still pretending that the whole scheme just might work. This story reads less like news and more like socialist fan fiction.

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