5% wealth tax in California drives tech billionaires to flee

Amid California’s proposal to impose a 5% "wealth tax" on billionaires, some of the state’s wealthiest tech entrepreneurs are already relocating to Florida, which has no personal income tax. This migration began even before a potential referendum is held, signaling the start of an exodus.

California, known as a hub for tech billionaires, generates massive tax revenues from these wealthy individuals. However, the Golden State is now facing major challenges due to a proposed wealth tax, which is shaking up the entire technology sector. As the state that once served as a sanctuary for wealth creators now looks to take a larger share of that wealth, the important question has shifted from “how much can be collected?” to “who will still be here to collect it?”

While the wealth tax proposal has yet to be put to a referendum scheduled for November, the mere possibility of it being enacted has already caused many billionaires to begin reorganizing their lives and assets. Some have moved their offices, others have re-registered their companies, and some have even changed their residency.

Mark Zuckerberg, the founder of Meta, is one such billionaire reportedly in the process of purchasing a $150-$200 million mansion on the exclusive Indian Creek Island in Miami, Florida.

The 5% tax could mean a massive tax burden for those at the very top of the wealth ladder. For example, Zuckerberg, whose wealth stands at around $239 billion, would face a tax bill of roughly $12 billion under the proposed 5% rate. This is a sum greater than the annual budgets of many developing countries, and he is far from the only case.

Currently, California has between 200-246 billionaires. If they remain residents of the state, the amount collected could be in the tens of billions, making it one of the largest wealth tax measures in US history.

Divesh Makan, co-founder of Silicon Valley-based investment firm ICONIQ Capital and a wealth manager for tech industry elites, revealed that at least five families have already left California. He predicts that another 15-20 families will likely follow if the tax proposal is approved by the public.

Supporters of the Tax:

Supporters, particularly the Service Employees International Union (SEIU), see this measure as a necessary solution to California's fiscal crisis. The state is facing a "Medi-Cal budget gap" that is expected to accumulate over $190 billion in the next decade, following cuts in federal health care spending.

Revenue from the wealth tax would be allocated to public healthcare, education, food assistance, and social welfare programs. Supporters argue that the tax would only affect a very small group of individuals who have seen their wealth grow exponentially over the last decade, and it will not significantly disrupt the lifestyles of billionaires.

Tax Experts Warn of Potential Consequences:

However, tax planners and wealth managers warn that such a wealth tax could accelerate the migration of the tax base out of California. If the tax base relocates, a large one-time revenue boost could be lost in the long term through reduced income taxes, investment income, and other economic activities.

The California Budget Office has cautioned that using a one-time wealth tax to solve the state's budget gap could negatively impact the general fund in the long run. Nearly 40% of California’s income tax revenue comes from the top 1% of earners. If this new tax encourages these high earners to leave the state, the government could lose vital revenue for public services.

Tech Billionaires Preparing for Change:

On the other hand, some billionaires are already planning their exits. Larry Page, co-founder of Google, has reportedly purchased over $173 million worth of real estate in Coconut Grove, Miami, and established entities in Florida before the deadline. Peter Thiel, co-founder of PayPal, has opened an office in Miami and registered as a Florida voter. David Sacks, former COO of PayPal, has opened an office in Austin, Texas. Sergey Brin, another Google co-founder, is reportedly considering buying a waterfront home in Florida.

All of these moves have taken place before January 1, 2026, which marks the cutoff date for determining residency status. The question now is not whether people support or oppose the tax but who will remain a resident when the law goes into effect.

Miami: The New Tax Haven?

Indian Creek Island in Miami, where Zuckerberg may soon have a new mansion, is not far from Jeff Bezos’ property and is an exclusive community with tight security. Florida’s lack of a personal income tax contrasts sharply with California’s top income tax rate of 13.3% for high earners in 2025.

This phenomenon could be described as "tax geopolitics," with California under pressure to address its budget shortfall and seeking additional revenue to support welfare and infrastructure. Meanwhile, states like Florida, Texas, and Nevada have adopted "low-tax" policies to attract companies, funds, and wealthy individuals to relocate.

This has created a “competition between states” to capture the tax base in a world where capital can move quickly. Housing, therefore, is no longer just about lifestyle but is becoming a financial risk management tool. In recent years, Miami has attracted not only real estate moguls and financiers but is increasingly becoming the base for venture capital funds, tech companies, and family offices.

This signals that the power centers of capital may no longer be exclusively tied to Silicon Valley.

The Tax That May Never Be Collected But Changes Behaviour Already:

While the proposed tax has not yet passed, its behavioral impacts have already begun. Reports indicate that at least six billionaires have changed their residency status before the new year. Many tax advisors are helping clients restructure their assets, with investment firms and funds opening offices in low-tax states.

This may be an example of how a law doesn’t need to be enacted to already trigger the movement of capital. If the bill passes, California may see a huge one-time revenue boost but could lose its long-term tax base.

The real question is not whether the wealth tax should be collected but whether California can design a policy that won’t destroy its revenue base. The answer to that question will shape the future of American capitalism in the next decade.