California's billionaire tax bet faces warning signs from France

California ballot initiative sponsors have put forward a one-time 5 percent wealth tax on billionaires that could raise about $100 billion, and the fight over it is already running into France’s old warning that wealth taxes can drive money and people away. California already has the highest top individual income tax rate in the nation at 13.3 percent, and the federal limits on state and local tax deductions since 2018 have made the burden on high earners harder to soften.

The best California-specific evidence cuts in more than one direction. A Stanford University study that examined 25 years of California tax records found little migration response after the state’s 2004 and 2012 millionaire-tax changes. But that study tracked top income filers, not billionaires facing a one-time levy on wealth, so it cannot answer the same question lawmakers are now asking about residency, asset moves and the durability of a much narrower tax base.

Even the migration data at the center of the debate have limits. The Internal Revenue Service bases its state and county movement figures on year-to-year address changes reported on individual income tax returns. Those numbers can show inflows and outflows, but they do not represent the full U.S. population, which makes them useful for direction and scale rather than a complete count of who leaves, who arrives and what drove the move.

France is the precedent now looming over California. The country imposed a national wealth tax in the 1980s and kept it for decades before repealing it in 2017 after years of criticism that it encouraged capital flight and produced mixed fiscal results. The issue has not disappeared in Paris, where Gabriel Zucman and other advocates have kept wealth-tax politics alive amid budget strain and government upheaval.

For California, that history is not a perfect map, but it is a warning sign. The state is testing whether a small group of billionaires can be taxed once without changing their behavior, while its own strongest evidence comes from income-tax changes and partial migration data. France suggests the answer may depend less on ideology than on how quickly the wealthiest taxpayers decide the cost of staying is higher than the cost of leaving.