A proposed tax on the net worth of California billionaires is sending shockwaves across the country. The controversial state law introduced on October 21, 2025, would impose a one-time, five percent tax during the lifetime of its residents. This type of tax on an individual’s “net worth” is similar to an estate tax, which taxes a decedent’s estate at death, and should now be part of estate planning and asset protection conversations in Maryland, the District of Columbia, and beyond. What Is the California Billionaire Tax? Initially, the law was proposed by a healthcare justice union as a way to pay for healthcare costs for the state’s low-income residents who will lose Medicaid coverage in the wake of federal funding cuts in the One Big Beautiful Bill Act (“OBBBA”); one estimate suggests the tax could generate $100 billion in revenue over five years. Supporters of the proposal argue that it is unfair that many billionaires shield their primary assets – such as corporate stock, investments, and real estate – from being taxed during life and at death. Proponents believe the tax is fair because billionaires benefited the most from OBBBA. The proposal will be on November’s ballot if enough residents sign the initiative. Challenges to the California Wealth Tax To avoid paying the tax, some billionaires may have fled the state – and relocated business headquarters – before the January 1, 2026, “resident test” date; naturally, a challenge to the law is expected on due process grounds because the law was introduced only 71 days before the new year, leaving little time to establish residency elsewhere. Additional challenges to the law are likely to be based on various constitutional grounds like equal protection and eminent domain, as well as California’s bill of attainder law that prohibits state laws from singling out a specific individual or group. The Purpose Behind the Proposed Tax Ultimately, the goal of this tax is to ensure that workers in California are healthy and able to work and support the state, which should benefit the billionaires who operate businesses there. Regardless of what happens this election cycle, the potential for a lifetime wealth tax has far-reaching implications on estate planning everywhere. Stay Tuned: What’s Next in the California Billionaire Tax Debate Stay tuned – Part 2 of the blog will explain the mechanics of the tax and give some examples, Part 3 will cover the legal theories behind the expected legal challenges, and Part 4 will discuss the challenge of planning for a lifetime wealth tax. Updates will be posted from time-to-time. By Justin M. Ginsburg, Esq., LL.M. – Senior Associate Attorney Disclaimer: this blog is for educational purposes only and is not legal advice. Mr. Ginsburg is licensed to practice law in Maryland and the District of Columbia and before the United States Tax Court.
