California’s proposed “Billionaire Tax Act” seems to be backfiring.

The tax would impose a one-time 5% tax on the total wealth (not income) of California’s richest residents.

Regardless of whether you think this is a good idea or not, the bottom line is that it may actually result in a loss of tax revenue even if it is passed and makes it past the courts.

CNBC’s Robert Frank reported that several high-profile billionaires have left California as of early 2026. Key figures who have departed or shifted residency/assets include Google founders Larry Page and Sergey Brin, PayPay/Palanitir co-founder Peter Thiel, Oracle founder Larry Ellison, venture capitalists David Sacks and Keith Rabosi, and Los Angeles-based financier Don Hankey.

Elon Musk had already moved to Texas in 2020-2021.

This may just be the beginning of a wider exodus — and California isn’t alone, with New York seeing a similar flight to more tax- and business-friendly states like Florida and Texas.

I can’t help but wonder if we would be better off using more honey than so much vinegar.

Think about all the taxes these rich guys personally pay (income, capital gain, sales and property) and, more important, the economic impact of the companies they control and the hundreds of thousands of high-income jobs their businesses have created.

We need these businesses and jobs.

CNBC also ran another report about affluent younger Americans leaving California in large numbers for lower-tax/lower-cost states, with Florida, Texas and even Tennessee attracting many of them. It seems like all the rhetoric is chasing them out of the state.

And what about decisions of future entrepreneurs about whether to start their company in California or perhaps a more business-friendly state?

The same is occurring in New York with New York City Mayor Zohran Mamdani literally chasing financier Ken Griffin out of town with a highly personal attack, saying the wealthy should pay “their fair share.”

Mamdami’s words got a reaction from Griffin three weeks later.

“And now what the mayor of New York has made clear to my partners, and principally my New York partners, is that we need to double down on our bet in Miami,” he announced.

CNBC reported that the top 1% pay 45% of New York taxes and the top 200 people pay 7.7%, more than the 75% lower-earners combined.

This certainly shows the huge income gap between high- and low-earners, but one must ask what a “fair share” might look like.

Keep in mind that tax revenue is only one-half of budget matters, with spending the other half.

According to the nonpartisan Legislative Analyst’s Office, California’s total state spending has roughly doubled over the past decade, with average nominal growth of 6% to 7% per year, and real per-capita spending rising meaningfully faster than population growth and inflation.

The state budget grew 63% in just the past five years from around $200 billion in 2019 to roughly $327 billion in the 2023-2024 fiscal year.

This year’s spending proposal is about $349 billion, which amounts to about $9,000 for every man, woman and child in the state, or about $36,000 for a family of four.

Capital naturally flows to where it can be most productive. That’s just plain old economics.

It seems to me we ought to be working to control spending, reduce over-regulation, and then cut taxes to stimulate economic growth.

History has shown that lower tax rates and lighter regulation stimulate growth, resulting in higher total government revenues based on a smaller percentage of a bigger pie.

While tax rates were cut significantly in 1981 and 1985, total nominal revenue increased. Sadly, government spending in this period grew even faster, resulting in large deficits. 

Instead of nonstop “soak the rich” rhetoric, maybe we could encourage successful people and companies to be part of the Golden State with a “We Are Open for Business” attitude and policies.

More honey, and less vinegar, please!