Will they stay or will they go?

If California were to approve a ballot proposal imposing a one-time 5 percent asset tax on the state’s billionaires, would they flee the state, taking their companies and thousands of jobs with them?

Economists Josh Rauh and Emmanuel Saez debated this question and other heated issues related to the proposal before an audience of 500 leaders in business, government and academia at the 2026 SIEPR Economic Summit on March 6. In a spirited discussion moderated by Richard Rubin of The Wall Street Journal, Rauh, the Ormond Family Professor of Finance at Stanford Graduate School of Business, and Saez, professor of economics at University of California, Berkeley, squared off over the measure’s potential and effectiveness.

The proposal’s backers, who include some of the state’s labor unions, are currently collecting signatures to place it on the November ballot.

Saez, one of the measure’s designers, cited the notion of “fairness.” He pointed to how California’s billionaires have made their fortunes largely in the state’s technology industry yet pay combined tax rates lower than that of more-typical residents. While the proposed tax could significantly boost billionaires’ tax bills, it would still leave them with vast wealth, especially amid recent gains driven by the rise of artificial intelligence, he said.

Even if California were to lose some tax revenues paid by billionaires who move away, the state could still come out ahead in the long run, Saez contended. And he questioned if all the state’s billionaires would actually leave.

“This is the place where the gold rush, the AI gold rush, the incredible wealth increases,” Saez said, noting that California’s infrastructure and other resources, and not only billionaire wealth, have contributed to the state’s successes. “In no other place in the U.S. can you build fortunes so quickly,” he said.

California has an outsized share of billionaires, he said, accounting for 27 percent of the nation’s billionaire wealth and 11 percent of the population. If current or newly minted billionaires “think it too much to pay that extra billionaire tax and they leave, so be it,” he added.

A hush filled the room as the debate on stage ratcheted up.

Rauh argued that Saez’s estimate of the revenue gain from the wealth tax is too rosy and that some of the gain would be offset when or if billionaires move away and stop paying the state’s income tax. As the proposal of the tax emerged, some high-profile billionaires have already left, and multi-millionaires who fear they’ll be the next ones subject to a wealth tax may follow suit, he said.

An exodus of the ultra-wealthy and their companies and jobs could “liquidate Silicon Valley” and exacerbate the state’s economic inequality, Rauh said. “Is it worth sending jobs and economic activity away?”  

“This tax is not a solution to California’s financial problems,” Rauh said.

As a practical matter, even if California’s voters approved a wealth tax, it would likely be tied up for years in legal challenges that would delay actual tax collection, Rauh said. Instead of instituting a wealth tax, California would be better off squeezing more value from its spending and reducing expenses as do other states, he said.

Saez responded that states with lower spending have fewer services and safety nets like Medicaid for their residents. “It’s a question of what type of society do you want to live in,” he said. “Before the billionaire tax debate, the people who were losing were not the billionaires; they were the people at the low-income end who can’t afford living in California.”