A newly proposed billionaire wealth tax in California is drawing intense attention from legal experts, investors, and ultra-high-net-worth residents, as its structure makes avoiding the tax through relocation extremely difficult, according to tax attorneys closely reviewing the measure.

The proposal, known as the Billionaire Tax Act, may appear on California’s general election ballot this November. If approved by voters, it would introduce a one-time tax of 5 percent on the total net worth of California tax residents whose assets equal or exceed $1 billion. What has made the proposal particularly controversial is not only its scale, but also its timing.

Unlike most new taxes, which apply only after voter approval, this measure is designed to reach backward. Under the proposal, the tax would apply to individuals classified as California residents as of January 1, 2026. Legal professionals say this retroactive start date significantly reduces the ability of wealthy individuals to change residency in time to avoid the tax. California is estimated to be home to between 200 and 250 billionaires, many of whom would have only limited time to restructure their residency status.

According to Christopher Manes, a tax attorney at Manes Law, the reasoning behind the early effective date is straightforward. He explained that if the law applied only after the November election, many wealthy residents would have ample opportunity to leave the state and potentially save tens of millions of dollars. By setting the date earlier, the proposal effectively closes that window.

Recent public disclosures suggest that some billionaires are already responding to the possibility of the tax. Tech investor Peter Thiel announced last week that he has established a long-term presence in Miami, noting that he has maintained a personal residence there since 2020 and opened an office for his venture capital firm, Founders Fund, in 2021. Attorneys familiar with the situation told media outlets that at least two other California billionaires have either already moved or are actively planning to relocate following the announcement of the proposed tax late last year.

Not all wealthy Californians are opposed. Nvidia CEO Jensen Huang, who is also a California billionaire, recently expressed indifference toward the proposal. Speaking to Bloomberg, Huang said he has not spent any time worrying about the tax and suggested that living in Silicon Valley comes with accepting the costs associated with the region. In his view, the benefits of remaining in California outweigh the financial impact of higher taxes.

The proposed measure is supported by the Service Employees International Union–United Healthcare Workers West, which argues that the early effective date is necessary to prevent billionaires from avoiding responsibility by shifting assets or claiming residency elsewhere. The organization estimates the tax could generate up to $100 billion in revenue, which supporters say would help offset potential healthcare funding cuts at the federal level and ensure that the wealthiest residents contribute a fairer share to public services.

However, legal experts warn that the aggressive design of the proposal is almost certain to spark legal challenges. Beyond its immediate financial implications, the measure highlights a growing concern among California’s tech founders and venture investors: how to plan an exit to a lower-tax state ahead of a major liquidity event, such as a company sale or public offering.

The issue is especially relevant as artificial intelligence continues to fuel a new surge in wealth creation across California. Tax advisors report that the state added roughly 50 new billionaires last year alone, driven largely by rapid growth in AI-related companies. Even before the billionaire tax proposal gained public attention, tax professionals say they were already seeing a sharp increase in inquiries from clients seeking advice on residency planning.

California’s residency rules are notably complex and differ from those of other high-tax states. New York, for example, primarily focuses on domicile and whether an individual spends more than 183 days in the state each year. California instead relies on what is known as the “closest connection test.” This standard examines a wide range of factors to determine whether a taxpayer’s strongest ties remain in California or have genuinely shifted to another state.

According to Manes, authorities evaluate everything from where a taxpayer lives and works to their social relationships, family connections, property ownership, and personal assets. Even seemingly minor details can play a role in determining residency status.

Successfully changing residency for tax purposes requires more than simply purchasing property or signing a lease in another state. Taxpayers must also demonstrate that the new location is their true primary residence. This can include evidence such as family photographs, personal belongings, heirlooms, and other indicators of permanent relocation. Importantly, the change in residency must occur before the taxable event, whether that event is the imposition of a new wealth tax or a significant financial transaction.

Manes emphasized that intent is a critical factor in these cases. Taxpayers must be able to show that they intended to leave California permanently or indefinitely, not merely temporarily. Because establishing this level of proof typically takes several months, attorneys believe that avoiding the proposed billionaire tax through relocation alone would be extremely difficult, if not impossible.

From a practical standpoint, many legal experts believe the opportunity to escape the tax has already passed. While the measure has not yet been approved by voters, the retroactive effective date creates substantial risk for anyone attempting a late-stage move.

That said, the proposal’s future remains uncertain. California voters have historically shown mixed support for tax increases, and Governor Gavin Newsom has publicly opposed the measure and is coordinating efforts to defeat it. Political analysts note that voter sentiment could shift as the election approaches.

Legal challenges are also expected to play a major role. Attorneys argue that the retroactive provision makes the proposal especially vulnerable to lawsuits. In addition to claims that the tax itself may be unconstitutional, individuals who leave California before the November vote could argue that applying the tax retroactively violates due process. While courts have permitted retroactive taxes in cases where there is a clear and rational legislative purpose, legal experts say judges are generally less receptive when an entirely new tax is created and applied backward in time.

Jon Feldhammer, a tax partner at Baker Botts, believes the strongest legal challenges are likely to come from individuals who relocate before the measure is approved. Because of the strength of these arguments, he said some wealthy Californians are planning to leave the state this year, positioning themselves between the January 1 effective date and the November election.

Billionaires, Feldhammer noted, are uniquely positioned to act quickly. With teams of attorneys, accountants, and logistical advisors at their disposal, they can efficiently manage the many requirements involved in changing residency. Many already own homes in multiple states or countries, making it easier to shift their primary residence when needed.

In Feldhammer’s words, billionaires represent one of the most mobile segments of the population. They have both the resources and the flexibility to respond rapidly to changes in tax policy. As the debate over California’s billionaire tax continues, their decisions may shape not only the state’s tax base, but also its broader economic future.