As word has spread that billionaires are fleeing California to avoid the possibility of getting hit with a 5% wealth tax, Gov. Gavin Newsom is finally stepping forward to make it clear he's not to blame for the fiasco that is already underway.
I described yesterday how Venture capitalist Chamath Palihapitiya estimated that already about half the wealth the tax was designed to go after has already fled the state.
Unfortunate update as of today:
— Chamath Palihapitiya (@chamath) January 11, 2026
More calls from friends. The total wealth that has left California is now $1T.
We had $2T of billionaire wealth just a few weeks ago. Now, 50% of that wealth has left - taking their income tax revenue, sales tax revenue, real estate tax revenue… https://t.co/IQZFieRgL7
If his estimate is accurate, and I think it is, then the wealth tax as structured will only bring in about $50 billion as opposed to the $100 billion the authors wanted. So either they need to reduce their spending plans (never an option with Democrats) or they need to make the 5% tax into a 10% tax to compensate.
In the wake of that news, Gov. Gavin Newsom is making the media rounds to ensure everyone knows he's been against this plan for months. Here's what he told the NY Times yesterday.
Mr. Newsom, a Democrat, said in an interview with The New York Times that he had been relentlessly working behind the scenes against the proposal, and that he would fight the measure if it reached the November ballot.
“This will be defeated — there’s no question in my mind,” Mr. Newsom said.
“I’ll do what I have to do to protect the state,” he added.
Newsom credits himself with predicting the disaster that is now unfolding.
California’s nonpartisan legislative analyst and the governor’s Department of Finance said in a joint review that the tax would probably deliver tens of billions of dollars in one-time money for the state, but that it could lead to hundreds of millions or more in continuing losses from billionaires leaving California to avoid the tax.
Evidence suggests that has already begun to happen, even though the proposal is a long way from becoming law. Larry Page and Sergey Brin, who together founded Google in a friend’s garage in Silicon Valley, have begun cutting ties with California. So has the tech venture capitalist Peter Thiel.
“This is what I feared, and it’s come true,” Mr. Newsom said in the interview.
Newsom is tiresome but in this case he's not wrong. Anyone with half a brain could have (and did) predict this outcome. And in case the NY Times interview wasn't enough, he said the same thing to Politico.
Newsom, in an interview with POLITICO on Monday, said the parade of headlines about California billionaires preparing to flee the state vindicates his opposition to the union-backed measure.
“This is my fear,” the California governor said. “It’s just what I warned against. It’s happening.”...
“The evidence is in. The impacts are very real — not just substantive economic impacts in terms of the revenue, but start-ups, the indirect impacts of … people questioning long term-commitments, medium-term,” Newsom said. “That’s not what we need right now, at a time of so much uncertainty. Quite the contrary.”...
“The good news is the overwhelming opposition to this by others,” he said. “I think it will be defeated, because I think people understand what it does versus what it promotes to do.”
I think he meant to say what it purports to do, but in any case his meaning is clear. I'm not in the habit of giving Gavin Newsom credit but in this case he is on the right side of this issue. The wealth tax is already turning into a disaster for California. Even if it's defeated, some of these people may not come back. And that could result in even larger budget deficits in the coming years.
The bad news is that Newsom says the Bernie Sanders promoted version of this wealth tax, i.e. a federal version that applies to the entire country, is a different story. He won't rule out considering something like that because, in that case, billionaires can't just pack up and move to another state. They'd need to move to another country and that is a lot more difficult to do if their companies are here. In other words, a President Newsom might be open to something like this. God help us all.
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