Are California’s Billionaires Crying Wolf?

As Massachusetts voters pondered a “millionaire tax” in the fall of 2022, a coalition of big businesses and wealthy entrepreneurs rallied against it. Among their arguments: The new tax would cause ultra-high-net-worth individuals and their businesses to flee, ultimately costing the state far more money than it raised.

It didn’t happen. From 2022 to 2024, as the new surcharge on incomes over a million dollars went into effect, the number of Massachusetts individuals with at least $50 million in total wealth grew by more than 35%, and the number of people making at least $1 million went up 40%. Meanwhile, the state took in an additional $2.46 billion in tax revenue for 2023 alone, money earmarked for education and transportation programs.

Fast forward to 2026, when a proposal in California to place a one-time, 5% wealth tax on billionaires primarily to backfill steep federal cuts to Medicaid funding has already sparked concern that the uber-rich will relocate — even though the proposal has yet to qualify for the ballot. It’s the kind of vague threat — emanating from high profile tech giants like the co-founders of Google and serial entrepreneur/Trump acolyte Peter Thiel — that garners attention from a breathless national media.

Will mass billionaire and business relocation actually happen? The tax hasn’t even happened. But historically, this is exactly the kind of imagined disaster that any measure perceived as anti-industry might garner, if for no other reason than that it’s an effective proactive attack on the idea itself.

“Big business and their lobbyists are always crying wolf,” said Peter Dreier, an urban policy analyst, researcher and professor emeritus of politics at Occidental College. “It happens whenever politicians or movements suggest reforms that would hold them accountable — would make them act more responsibly towards consumers, workers, the environment or the public interest.

“Whenever business doesn’t like being held accountable or having any standard set for its behavior by government, they say it’ll kill jobs or that the businesses will move out,” Dreier added. “Ninety-five percent of the time they’re lying.”

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There is almost no historical evidence to support the idea that higher state taxes cause rich people to move from where they live. “Tax flight” among the ultrawealthy is largely a myth, including in California. In 2024, Stanford researchers found that just over 2% of millionaires each year change states because of taxes.

That hasn’t stopped the conversation around the proposed wealth tax from focusing on the purported flight of billionaires. Multiple national headlines, for example, have noted that Thiel, co-founder of tech mega-corporations PayPal and Palantir, is “preparing to flee” California, all while pumping $3 million into a campaign to defeat the tax.

The narrative might carry more weight if not for the fact that Thiel bought a house in Miami in 2020, opened a satellite office for his venture capital firm there in 2021 and moved his voter registration to Florida in 2024 — all of it well before the idea of a California wealth tax had even been conceived. And if Thiel is indeed out of the Golden State, why’s he funding the anti-tax effort?

Technology centers Silicon Valley and San Francisco are often at the heart of the wealth tax debate, and rightfully so. Best estimates put the current number of billionaires in California at around 215, and half of those made their fortunes in tech.

That, too, matters. The economic principle of agglomeration holds that like-minded businesses prefer to cluster, remaining in proximity even as they compete, because of benefits like being able to share massive job, idea and resource pools. Companies like Alphabet (Google), Meta, Apple, Nvidia and others have launched and thrived in Silicon Valley, while San Francisco is the emerging global hub of the artificial intelligence (AI) boom.

There will be more billionaires in California, not fewer. Though some will undoubtedly leave, others are building their fortunes now.

Laura Zwicker, a Los Angeles-based tax adviser, recently told London-based The Times that among her 10 billionaire clients, “None of them are interested in moving out of the state.” Zwicker’s may be an unusual group, and the same story quoted others as saying some billionaires are in fact making plans to leave California. But Zwicker noted that younger billionaires “may feel that they have an obligation to share some of the wealth that they made, in the way that the government decides to have them share it.”

In an interview with CNBC in early January, Nvidia CEO Jensen Huang, not new to the game at age 62, mostly echoed that sentiment. “I’ve got to tell you, I have not even thought about it once,” Huang told the network when asked about the tax, which might cost him as much as $7.75 billion. (He’s worth an estimated $155 billion.) “We chose to live in Silicon Valley, and whatever taxes they would like to apply, so be it,” Huang added. “I’m perfectly fine with it.”

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The California Billionaire Tax Act will require nearly 900,000 valid voter signatures to qualify for the 2026 state ballot, at which point it will encounter fierce pushback from a business sector determined to sink it, partially via the threat that the tax will cause the state to bleed billionaires, who’ll take their businesses elsewhere. If the proposal passes, it will almost certainly face immediate legal challenge.

The primary force behind the proposal is the Service Employees International Union-United Healthcare Workers West, many of whose members work in a health care industry directly threatened by the federal reduction in Medicaid funding. (Disclosure: The union is a financial supporter of Capital & Main.) The merits of the measure itself notwithstanding, though, the threat of a resulting business exodus is a familiar one.

It harkens back at least as far as 1911, when the Triangle Shirtwaist Factory Fire exposed the squalid and unsafe conditions in New York City’s Garment District warehouses. Business interests and lobbyists immediately began opposing reform measures, claiming the costs would drive them out of the state. But when such outmigration actually began to accelerate, in the 1950s, it wasn’t because of safety reforms — it was because Southern states offered cheaper labor and less unionization.

The threat of the relocation of wealth certainly gets attention. California Gov. Gavin Newsom is actively opposing the billionaire tax measure, and recently pointed to the parade of national headlines as proof — the question of their actual validity evidently the subject for another day.

But it’s not a new tack. From child labor and workplace safety laws to Social Security, seatbelts and the minimum wage itself, business interests through the decades have threatened that the introduction of such new ideas would “destroy American civilization as we know it,” Dreier said. The fact that it never happens won’t dissuade the business class from trotting out the tactic again.

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