Introduction
When Mark Zuckerberg purchased a Florida mansion in February ahead of a planned relocation, many assumed that the move would come too late to avoid the California billionaire wealth tax, should it be adopted by voters in November. After all, the initiative seeks to taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. any billionaire who was a California resident as of January 1, 2026. But Zuckerberg might know something that many do not: the residency and assessment provisions of the ballot initiative are highly vulnerable to legal challenge. Even if the measure itself is enacted and survives its inevitable litigation, departing sometime in 2026 could allow billionaires to avoid some or all exposure to the wealth taxA wealth tax is imposed on an individual’s net wealth, or the market value of their total owned assets minus liabilities. A wealth tax can be narrowly or widely defined, and depending on the definition of wealth, the base for a wealth tax can vary..
This expectation, which has a sound legal basis, will almost certainly prompt an ongoing exodus of California billionaires as the November election approaches. Wealthy Californians who were unable to relocate on short notice last year may do so at greater leisure this year. And while no legal outcome is guaranteed, they would have good reason to believe that their departures could pay off.
The 2026 California Billionaire Tax Act would impose a one-time 5 percent tax on the global net worth of billionaires who were California residents as of January 1, 2026, with taxable wealth measured as of December 31, 2026.[1] Because it goes before the voters in November, the snapshot residency date would precede the adoption of the tax by more than ten months. The mere fact of retroactivity is not a legal bar to the tax, but the specifics of the proposed tax give mid-year movers good reason to believe the residency date would not survive legal scrutiny.
While the initiative’s drafters argue that the tax’s residency provisions are legally unassailable, the ballot language they drafted betrays far less confidence in their position. The initiative attempts to facilitate alternative apportionment mechanisms if default full-year apportionment is ruled unconstitutional, and requests judicial reformation of the residency and assessment date provisions (in lieu of invalidating the whole measure) if the courts reject those in the initiative. The drafters knew that in their attempt to lock billionaires into the tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. before many of them could realistically react to the proposal, they were relying on provisions that invited serious legal challenges. This paper explores those legal deficiencies and considers how residency challenges could play out.
Two particular legal arguments are worth highlighting: that the initiative retroactively establishes a wholly new tax rather than simply modifying an existing one; and that the tax is not apportioned for those who depart the state and even extends to post-departure wealth accumulation. The former challenges the validity of the January 1 residency date, while the latter argues against the December 31 valuation date and continued taxation after a taxpayer’s mid-year departure.
The Unique Design of Residency and Valuation Date Provisions
The proposed wealth tax adopts the residency standards used for state income tax purposes but treats residency as a one-time event, with a tax obligation date of January 1, 2026. This distorts the ordinary understanding of residency, which is typically established under a “closest connection” test that considers time spent in, and connections with, the state (including family, property, and professional and social ties).
Ordinarily, if someone began the year as a California resident but established residency elsewhere later in the year, they would be treated as a part-year resident, owing California income tax for the portion of the year they spent in California. Under the provisions of the wealth tax, however, not only would a taxpayer who leaves California sometime in 2026 be subject to tax on the entirety of their wealth, with no apportionment, but they would even be taxed on wealth that appreciated or was acquired after their departure. Defining the tax base as of December 31, 2026, measures liability as of a date on which many taxpayers may no longer have nexus with California.
The ballot measure tries to anticipate challenges to these provisions. It permits taxpayers to seek “constitutional alternative” apportionment if the default rule, which assigns 100 percent of the tax base to California regardless of residency throughout the year, is unlawful or unfair as applied. It also incorporates an unusually broad severability clause that, among other things, seeks to instruct courts to modify the January 1 and December 31 dates if they fail to withstand legal scrutiny, writing that these dates “shall instead be construed to refer to the earliest date or dates” the courts deem legally permissible.[2]
Proponents of the wealth tax clearly believed these provisions were necessary to preempt a larger exodus and preserve the wealth tax base, fearing that if billionaires had a year to leave, a far larger share would do so than if the timeline were severely constrained. This fear led to the inclusion of provisions they knew were legally vulnerable.
Indeed, the initiative’s drafters appear to believe that the measure offered virtually no timeline at all, contending that few if any of those who departed between the unveiling of the ballot measure and the January 1 snapshot residency date had enough time to sever ties with California and genuinely establish domicile elsewhere.[3] The drafters argue:
If voters approve the [California Billionaire Tax Act], it will fall on any billionaire who was a California resident as of January 1, 2026. Residence for purposes of the CBTA is based on longstanding residence rules under California’s personal income tax. Among other aspects of this approach, which is almost a century old, California residents are presumed to remain in California until they are able to demonstrate that their absence from California was not temporary. When California courts make that determination, they look to whether a person’s closest personal, business, family, and political ties are to California, or instead to somewhere else, Thus, simply buying real estate, opening office space out of state, or announcing a planned move is not the same as successfully severing California tax residence. As courts recognize, it is very easy to claim to move, but very hard to actually do it. Many Californians have claimed to have ‘moved’ for tax purposes, only to find that their move was not effective (at least not as early as they hoped).[4]
If the measure passes and the residency date is upheld, these domiciliary questions will be subject to fact-intensive adjudication, but the notion that using a snapshot date mostly precluded the viability of a late 2025 move is itself significant, because it suggests that in practice, the law is not just retroactive to January 1, 2026, but to sometime before that—and that the intent of the provision was to largely foreclose options to respond. The initiative combines “longstanding residence rules” with a completely new snapshot-date design to source all wealth to California, denying partial apportionment and effectively pushing retroactivity sometime into 2025.
The Retroactivity Question
Retroactive taxation is not, in itself, unconstitutional. Both the federal and state governments routinely make certain tax changes—both increases and reductions—retroactive to the beginning of the year. The US Supreme Court has upheld retroactive tax changes in numerous cases, most notably United States v. Carlton (1994), in which it affirmed a retroactive amendment that corrected a drafting error in an estate tax deductionA tax deduction allows taxpayers to subtract certain deductible expenses and other items to reduce how much of their income is taxed, which reduces how much tax they owe. For individuals, some deductions are available to all taxpayers, while others are reserved only for taxpayers who itemize. For businesses, most business expenses are fully and immediately deductible in the year they occur, but ot that had inadvertently extended the deduction far beyond congressional intent. The Court concluded that the retroactive tax at issue in Carlton satisfied the Due Process Clause, applying the rational basis standard.[5]
Notably, however, the Court specified that the period of retroactivity was “modest” and that Congress had acted “promptly” to address its error, though the majority stopped short of specifying requirements in these areas. With similar ambiguity, earlier cases like Welch v. Henry (1938) held that “a tax is not necessarily unconstitutional because retroactive” but that its validity hinged upon whether “retroactive application is so harsh and oppressive as to transgress the constitutional limitation.”[6]
If the proposed wealth tax had only to survive rational basis scrutiny, it would simply be required to be rationally related to a legitimate government interest. The initiative’s drafters certainly appear to have possessed a rational basis for their decision to make the tax retroactive and to do so in the manner they chose: they wanted to lock in taxpayers.
An argument could be advanced that, unlike the tax in Welch v. Henry, retroactively locking taxpayers into a 5 percent wealth tax is “harsh and oppressive.” Restricting the right of travel, moreover, is subject to strict scrutiny analysis, requiring that the provision be narrowly tailored and serve a compelling government interest. Even if the provisions are deemed to be narrowly tailored, finding a compelling government interest in restricting the movement of wealthy Californians would likely elude even the most ardent supporters of the measure. But the greatest vulnerability of the tax’s retroactivity is in its status as a wholly new tax, not merely an adjustment to an existing tax.
In two gift taxA gift tax is a tax on the transfer of property by a living individual, without payment or a valuable exchange in return. The donor, not the recipient of the gift, is typically liable for the tax. cases, Blodgett v. Holden (1927) and Untermyer v. Anderson (1928), the Supreme Court struck down retroactive applications of the new tax to gifts made before the law’s enactment. The Court concluded that, whatever authority existed for retroactive tax changes, due process was short-circuited when a wholly new tax was imposed retroactively.[7]
Notably, the Supreme Court upheld this standard even when the taxpayer had good reason to believe that such a tax was forthcoming. In the second case, the taxpayer made the gift mere days before the gift tax legislation passed the second chamber, with a substantial expectation that the legislation would be enacted. The Court still held the tax invalid, holding that “[t]he taxpayer may justly demand to know when and how he becomes liable for taxes—he cannot foresee and ought not to be required to guess the outcome of pending measures.”[8]
This is significant, as it means that what is called “constructive notice” is irrelevant for the retroactive imposition of a wholly new tax. Proponents of the wealth tax have argued that, while the tax itself is retroactive, the January 1, 2026, tax obligation date postdates media coverage of the wealth tax effort and the initiative language’s submission to the Office of Attorney General for circulation approval. Untermyer refuses to conflate proposals or pending legislative acts with the actual enactment or ratification of legislative changes.
The majority in Carlton expressed skepticism of these cases but did not overturn them, writing that “to the extent that their authority survives, they do not control here” because “the amendment at issue here certainly is not properly characterized as a wholly new tax.” In a concurrence, Justice O’Connor insisted that “a wholly new tax cannot be imposed retroactively, even though such a tax would surely serve to raise money.” She also cited a 1986 case, United States v. Hemme, which reaffirmed the “wholly new tax” distinction.[9]
In 2012, a Congressional Research Service report on the constitutionality of retroactive taxation noted that it is possible for retroactive tax legislation that increases a taxpayer’s liability to violate the Constitution, observing that “some cases where retroactive taxes have been struck down suggest that extended periods of retroactivity and lack of notice of a wholly new tax can raise due process concerns under the Fifth Amendment.”[10] Referencing the Carlton majority’s “downplaying of their significance,” CRS wrote that: “Nonetheless, the cases are useful because the Court in subsequent cases has contrasted them with permissible legislation, thus indicating they may represent the boundaries of the Due Process Clause.”[11]
The wealth tax’s proponents dismiss the “wholly new tax” distinction as ephemeral by observing that, in 1916, the Supreme Court “brushed aside [retroactivity] claims in a few brief sentences” in a case upholding the first post-Sixteenth Amendment individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source.[12] But the proponents themselves brush aside the argument too hastily. In Brushaber v. Union Pacific Railroad Co. (1916), the Court emphasized that the March 1 operative date of the income tax (enacted in October) was chosen as a date subsequent to the February ratification of the Sixteenth Amendment, which cleared the way for the income tax.[13]
The Brushaber Court appears to treat the Sixteenth Amendment’s income tax authorization as bound up with the enactment of the income tax.[14] Whether this makes sense is debatable. It would be as if the California proposal was divided into two components, the constitutional amendment and the statutory authorization, and the constitutional amendment was ratified first. Brushaber would then stand, at least, for the notion that the new tax could be imposed retroactive to the date the constitutional amendment went into effect. It is not clear that this supports the actual situation in California today.
Even more importantly, Brushaber was decided in 1916. The Supreme Court ruled twice against the retroactive application of a wholly new tax a decade after Brushaber, and the Court has continued to cite those decisions down to the present day.
Had the Carlton Court been required to revisit the constitutionality of the retroactive establishment of a wholly new tax, it is not clear how they would have ruled, but subsequent cases have continued to cite Blodgett and Untermyer to distinguish ordinary retroactive taxation from the new taxes at issue in those cases. There can be no certainty as to how today’s Supreme Court would decide this issue, either. But for now, Blodgett and Untermyer are still cited by the Court, and the distinction they make has considerable logic that argues in favor of sustaining the precedent. If Blodgett and Untermyer stand, the California wealth tax’s retroactivity likely falls.
Opponents of the wealth tax may also seek to advance an argument against the period of retroactivity, arguing that it is not “modest.” Courts have consistently upheld retroactivity to the start of the current calendar year, seemingly shielding a January 1 date from any substantial vulnerability. However, if, in practice, applying a snapshot date to the traditional residency determination means that a departure must have occurred substantially before January 1 to be effective, courts might need to wade into the murky question of how long is too long. Nichols v. Coolidge (1927) stands for the principle that there are limits to retroactivity, and subsequent cases, including Carlton, have cited a limited period of retroactivity as salient in upholding retroactive tax legislation.
Even Carlton, with its permissive standards, cites as a rationale for its decision that Congress had acted “promptly” to fix a drafting error, and it and other cases emphasize legitimate administrative purposes of narrow retroactivity. The selection of a date expressly chosen to maximize the taxpayer lock-in effect is at odds with this jurisprudence.
That choice has implications even if courts determine that “constructive notice” is relevant, notwithstanding Untermyer. If, in practice, a snapshot date generally cannot be avoided without acting prior to the wealth tax’s public unveiling (which proponents suggest), then constructive notice would not have existed prior to the retroactive period.[15]
Functionally foreclosing the option of moving to avoid the new tax could also implicate the right to travel, established in Crandall v. Nevada (1868) and given further definition in cases like Shapiro v. Thompson (1969) and Saenz v. Roe (1999). Under Shapiro, “any classification which serves to penalize the exercise of [the right to travel] is unconstitutional unless shown to be necessary to promote a compelling governmental interest.”[16] If the initiative establishes a residency standard intended to virtually preclude any avoidance-related departures, the rational basis for such an early date is predicated on an attempt to restrict movement between states that otherwise would have occurred, interfering with the exercise of that right. This invites a much higher level of scrutiny, as movement between states is a fundamental right.
The Post-Departure Wealth Problem
By combining a January 1 residency date with a December 31 valuation date, the California initiative gives rise to two further issues that invite legal challenges: (1) the tax would be imposed without any apportionment even if the taxpayer departs and lives elsewhere for much of the year; and (2) the tax would even apply to wealth that accrued or was acquired after departure, and owes wholly to activity in another state. If voters approve the tax, courts will have to determine whether 100 percent apportionment is appropriate for a taxpayer who was domiciled outside the state for much of 2026, and what to do about any wealth earned after a taxpayer’s departure.
States can tax their residents’ worldwide income, but due process requires “some definite link, some minimum connection between a state and the person, property, or transaction it seeks to tax.”[17] In a 2019 case, the Supreme Court held that the minimum connection requirement was not satisfied when North Carolina sought to tax a trust’s undistributed income based on the presence of an in-state beneficiary without present rights to the income.[18] For a state’s tax to satisfy due process requirements, there must be a constitutionally relevant connection at the time of the tax and with respect to the income, property, or activity subject to the tax.
By taxing wealth situated outside California, some of which may have been earned and accrued entirely outside the state—consider, for instance, a billionaire who created their fortune in New York and only moved to California in 2025, who would be subject to California tax on all that previously-accumulated wealth—the proposed tax raises a host of important constitutional questions. For purposes of this analysis, however, only those pertinent to 2026 residency are considered.
A taxpayer who establishes residency outside California in the middle of 2026 can persuasively argue against California’s claim on the entirety of their wealth despite the lack of any continued connection between California and the assets subject to tax. Their challenge is further strengthened by the December 31 snapshot valuation date, capturing post-departure wealth, not just from the appreciation of wealth accrued in California, but also wealth acquired with no connection whatsoever to California. Notably, a taxpayer who was a California resident on January 1, established domicile elsewhere later in the year, and only crossed the $1 billion net worth threshold after their departure would be subject to the tax even though they were never a billionaire while a California resident.
The four-prong test from Complete Auto Transit, Inc. v. Brady (1977)[19] is foundational to dormant Commerce Clause tax jurisprudence. In Complete Auto, the court required (1) substantial nexus between the taxpayer or activity and the taxing state; (2) fair apportionment such that only the portion of the activity within the taxing state; (3) nondiscrimination such that the state does not favor in-state taxpayers over nonresidents or out-of-state businesses; and (4) a fair relationship between the tax and the services, benefits, and protections provided by the state to the taxpayer.
The wealth tax is potentially susceptible to several dormant Commerce Clause challenges. Limiting the focus to 2026 residency issues, the billionaire tax’s default rule that the tax is not prorated by residency history is in obvious tension with the fair apportionment prong. Simply permitting taxpayers to seek an individualized judicial remedy is likely insufficient to save the apportionment rule; requiring taxpayers to challenge an unconstitutional rule in each instance, demonstrate the specific unfair outcome, and propose an alternative apportionment that may or may not be accepted shifts the litigation burden onto the taxpayer and establishes the full apportionment method as presumptively valid notwithstanding its constitutional infirmity.
The initiative separates residency and valuation dates by a year. But once a person establishes domicile outside California, the state’s jurisdiction to tax a former resident is in doubt. Proponents would argue that the tax obligation attaches on January 1, 2026, and that the valuation in December is merely a measure of liability already incurred, but this is unpersuasive. The relevant question is whether California retains a constitutionally sufficient connection to the person, property, and activity being taxed, and California has a doubtful continued connection to wealth from a taxpayer who no longer resides in the state when the wealth is assessed. The bifurcation of residency and measurement snapshot dates, moreover, gives the appearance of an unconstitutional exit tax, interfering with the right of travel by denying would-be movers the benefit of any such move.
Courts distinguish between the power to tax residents on their worldwide income and the power to tax values or transactions unrelated to the state. The former is based on domicile and the benefits of residence, and it does not follow that a state may rely on a former resident’s prior domicile to tax property that appreciated or was acquired later.
Under Complete Auto, fair apportionment requires both internal and external consistency. The internal consistency test asks whether every state adopting the same rule would result in double taxationDouble taxation is when taxes are paid twice on the same dollar of income, regardless of whether that’s corporate or individual income.. The external consistency test requires that a state only levy tax on the portion of the relevant tax base that reasonably reflects the portion of the taxed activity that is attributable to the state. Taxing 100 percent of a taxpayer’s wealth as of December 31 to a taxpayer who was only a resident for part of 2026, and without any adjustment for wealth accumulated after departure, takes the unapportioned approach that Complete Auto rejects.
The outcomes of more recent cases, like Comptroller of Maryland v. Wynne (2015),[20] while addressing a very different tax issue, also demonstrate that unapportioned burdens are unconstitutional. In a variety of other cases, the Supreme Court has similarly held that states cannot tax extraterritorial activity or value without a sufficient relationship between the taxed value and the taxpayer’s in-state activity.
States are permitted some degree of “trailing nexus,” typically in business tax contexts, under which a state may tax receipts after a taxpayer has departed the state if the later receipts arise from earlier in-state activity. But this comes with limits and does not permit a state to simply tax all subsequent economic activity by former residents. Since wealth is a status, not a transaction, moreover, there is not an activity to “trail,” nor does the wealth tax contain any provision attenuating the tax obligation for movers, as tends to be found in existing business taxes with trailing nexus.
Courts might well strike down the California Billionaire Tax Act on the grounds that its structure violates the dormant Commerce Clause. If, alternatively, they sought to reform the statute to address these issues, this would likely require apportionment, and quite possibly the elimination of “snapshot” residency.
Judicial Reformation
California’s courts are highly reluctant to undertake “judicial reformation”—the partial rewriting of statutes to render them constitutional—of tax laws. The basic contours of judicial reformation are outlined in Kopp v. Fair Political Practices Commission (1995), which holds that “a court may reform a statute to satisfy constitutional requirements if it can conclude with confidence that (i) it is possible to reform the statute in a manner that closely effectuates policy judgments clearly articulated by the enacting body, and (ii) the enacting body would have preferred such a reformed version of the statute to invalidation of the statute.”[21] However, in multiple cases, including Abbott Laboratories v. Franchise Tax Board (2009),[22] Ventas Finance I, LLC. v. Franchise Tax Board (2008),[23] and Ceridian Corp. v. Franchise Tax Board,[24] California courts have refused to apply judicial reformation to tax laws.
In Ventas, the California appeals court spelled out a rationale: “In the context of cases involving tax statutes that violate the Commerce Clause, the courts have consistently declined to exercise the power of judicial reformation to cure the constitutional violation.” Rewriting the statute, the court held, “would involve us in precisely the type of judicial policymaking and encroachment on the legislative function in violation of the separation of powers doctrine, against which the Kopp court warned.”[25]
The power to levy taxes is vested in the legislative branch and, in California, also with the people through direct democracy measures. Courts are justifiably reluctant to presume what those vested with these powers would have done, especially when presented with multiple options for reformation. In Abbott Laboratories, the appellate court observed that there were at least two different ways to address the constitutional defect in the statute, that there were widely different fiscal effects between the choices, and that when choices diverge, “the Legislature, not this court, must resolve the matter.”[26]
Unlike in these prior cases, we do know that the drafters of the initiative would want the courts to engage in judicial reformation, if needed, to save the tax. They even indicate what shape that reform would take: adjusting both the tax obligation date and the valuation date to the earliest constitutionally allowable dates. But this could still leave the courts to decide among several competing options, and just as importantly, the initiative drafters are not the only “legislators” involved, a class that also includes the voters who decide on the initiative’s fate.
If, for instance, courts concluded that the measure’s constitutional infirmities could be cured by shifting the residency date to January 1, 2027, can they be confident that voters would have approved the measure had they understood that billionaires leaving in 2026 would be exempt, contrary not only to what they had been informed by proponents, but also to what the language of the initiative purported to accomplish? If courts determined that the use of a single-day snapshot was an improper way to grapple with residency, would that level of judicial reformation—which goes beyond what the initiative’s drafters sought to authorize—be permissible, or would it involve the court in too much policymaking? If the courts decided that the bifurcation of residency and valuation dates was constitutionally impermissible, would collapsing them into the same date, or creating nexus and apportionment rules to account for part-year residency, constitute judicial reformation or a wholesale rewriting of the statute in precisely the way that California courts have previously refused to do?
Just because drafters desire judicial reformation does not mean that they are entitled to it, or that they can delegate powers they may have no authority to delegate. The courts have sought to safeguard the line between judicial reformation and judicial undertaking of legislative powers. The more infirmities courts identify on assessment and valuation dates, the less plausible judicial reformation becomes, and the more likely they are to strike down the wealth tax as a whole.
Suppose, however, that the initiative passes and the courts determine that the residency standards or apportionment rules are unconstitutional, but seek to reform them. What choices are available?
Selecting the day the initiative qualifies for the ballot does not appear to solve the potential infirmities for a wholly new tax. The day the initiative receives voter approval is a possibility, though it is not entirely clear whether this should be November 3 or the December date when those results are legally certified. December 31, 2026 (aligning with the valuation date, if it survives as-is), or January 1, 2027, is also an option, though the latter raises questions of whether a tax act specifically for 2026 can survive if reformation requires its residency date to be pushed to 2027. The courts might also conclude that the only acceptable approach is to use residency for tax year 2027, not under snapshot-date treatment, but with the same apportionment approach used under the individual income tax—again raising questions of whether such a change, even if required to save the initiative, is within the permissible scope of judicial reformation.
Implications for Mid-2026 Movers
The text of the 2026 California Billionaire Tax Act says that any billionaire who departs in 2026 will have left too late to avoid tax liability, and that even those who left in late 2025 may be subject to the wealth tax. But the relevant provisions are constitutionally suspect, giving potential taxpayers multiple reasons to believe that a mid-2026 move could enable them to avoid some or all of the tax.
A facial challenge to retroactivity of a wholly new tax could require establishing a later residency date and potentially abandoning “snapshot” residency determinations, assuming the tax survives at all. An as-applied challenge could result in courts determining that a person who is no longer a resident on the valuation date lacks sufficient nexus with California based on minimum-connections requirements. Even if the tax survived a broader apportionment challenge, movers could invoke the initiative’s own framework and make a compelling argument that their liability should be adjusted based on the amount of time they spent as a nonresident in 2026. And any wealth acquired or accrued after departure could be excluded as having no legitimate connection with California.
This leaves billionaires with continued motivation to depart the state in 2026, and increases the harm caused by the initiative merely by being perceived as viable. Even billionaires who opt to wait and see, perhaps hopeful that the measure will fail, may get a final chance to depart and avoid some or all of the tax, if courts uphold the tax but reform its dates to some post-Election Day option, potentially apportioned rather than subject to “snapshot date” treatment. The measure’s approval at the ballot could spur another round of departures.
Conclusion
So long as the wealth tax initiative appears electorally viable, billionaires will be incentivized to move to avoid it. If approved by voters, the wealth tax will face a flurry of serious legal challenges—some to its overall constitutionality (not explored here), and some regarding who can be taxed and to what degree if the tax survives broader legal scrutiny. The whole tax could be struck down, or it could be reformed or applied in ways that limit or eliminate liability for post-January 1, 2026, movers.
The initiative’s drafters wanted to avoid this possibility, locking billionaires into the tax base with little or no ability to respond. But those provisions will be tested in court, and those who establish domicile in another state have good reason to believe that their departure will make a difference.
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References
[1] Initiative No. 25-0024A1 (Cal. proposed 2026), https://oag.ca.gov/system/files/initiatives/pdfs/25-0024A1%20%28Billionaire%20Tax%20%29.pdf.
[2] Id.
[3] Brian D. Galle, David Gamage, Emmanuel Saez, and Darien Shanske, “Expert Report On The California 2026 Billionaire Tax: Revenue, Economic, and Constitutional Analysis,” University of Missouri School of Law Legal Studies Research Paper No. 2026-01, Dec. 31, 2025, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5996554, 5.
[4] Id., “Response to ‘The Net Present Value of the Billionaire Tax Act’ March 4, 2026,” March 17, 2026, https://eml.berkeley.edu/~saez/responsetorauh26.pdf, 2-3.
[5] United States v. Carlton, 512 U.S. 26 (1994).
[6] Welch v. Henry, 305 U.S. 134 (1938).
[7] Blodgett v. Holden, 275 U.S. 142 (1927); Untermyer v. Anderson, 276 U.S. 440 (1928).
[8] Untermyer v. Anderson.
[9] United States v. Carlton.
[10] Erika K. Lunder, Robert Meltz, and Kenneth R. Thomas, “Constitutionality of Retroactive Tax Legislation,” Congressional Research Service, Oct. 25, 2012, https://sgp.fas.org/crs/misc/R42791.pdf, i.
[11] Id, 2.
[12] Brian Galle, David Gamage, and Darien Shanske, “Correcting the Record: Addressing Some Legal Arguments About the 2026 Billionaire Tax,” Jan. 9, 2026, https://eml.berkeley.edu/~saez/galle-gamage-shanskeCBTAlegal.pdf
[13] Brushaber v. Union Pacific R. Co., 240 U.S. 1 (1916).
[14] The Court notes that income taxes themselves were not prohibited prior to the Sixteenth Amendment, but, under Pollack v. Farmers’ Loan & Trust Co., were considered direct taxes subject to apportionment, a restriction lifted by the Amendment. Some argued, and continue to argue, that apportionment was never necessary for income taxes, but the Sixteenth Amendment presupposed that it was. Because the Revenue Act of 1913 lacked apportionment, it relied on the Sixteenth Amendment.
[15] The filing was stamped as received on October 22, 2025, and the filing was announced at a press conference on October 23. The amended text was received and published on November 26. Petition circulation was approved on December 26.
[16] Shapiro v. Thompson, 394 U.S. 618 (1969).
[17] Miller Bros. Co. v. Maryland, 347 U.S. 340, 344-45 (1954).
[18] North Carolina Department of Revenue v. Kaestner 1992 Family Trust, 588 U.S. 18-457 (2019).
[19] Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977).
[20] Comptroller of Treasury of Md. v. Wynne, 575 U.S. 542 (2015).
[21] Kopp v. Fair Political Practices Commission, 11 Cal. 4th 607 (1995).
[22] Abbott Laboratories v. Franchise Tax Board, 175 Cal. App. 4th 1346 (2009).
[23] Ventas Finance I, LLC. v. Franchise Tax Board, 165 Cal. App. 4th 1207 (2008).
[24] Ceridian Corp. v. Franchise Tax Board, 85 Cal. App. 4th 875 (2000).
[25] Ventas Finance I, LLC. v. Franchise Tax Board.
[26] Abbott Laboratories v. Franchise Tax Board.
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