The proposed California billionaire tax includes a provision that would impose a one-time 5% tax on residents with a net worth of $1 billion or more. The tax would apply to California residents as of Jan. 1, 2026, leaving little time for billionaires to change residency. Some billionaires have already moved to states with lower taxes.

Some California billionaires, like Peter Thiel, have already established residency in states like Miami. However, Nvidia CEO Jensen Huang said he is fine with the proposed tax. The Service Employees International Union-United Healthcare Workers West is backing the bill, aiming to raise $100 billion in revenue to offset healthcare cuts and ensure the wealthy pay their fair share.

California’s rules around tax residency are complex, using a “closest connection test” to determine residency. Changing residency or claiming non-residency can trigger additional rules, making it difficult to avoid the proposed wealth tax. Legal challenges are expected due to the aggressive timeline and retroactive provision of the tax.

It is unclear whether California voters will approve the measure, and Gov. Gavin Newsom is working to defeat it. Attorneys expect legal challenges, especially from those who leave before the tax is passed. Some wealthy Californians are planning to leave this year to avoid the tax, leveraging their resources to quickly change residency.

Billionaires have the means and ability to move quickly, with large teams to navigate the requirements for changing residency. The portable nature of their wealth allows them to switch residencies more easily. Legal challenges are expected, especially from those who plan to leave before the tax goes to voters in November.

Read more at CNBC: California wealth tax proposal leaves billionaires with little way out