The Exodus Continues: How California Business Owners Are Reacting to the Proposed Wealth Tax

On November 3, 2026, voters in California will decide whether to impose a one-time 5 percent tax on the net worth of every billionaire residing in the state as of January 1, 2026. The proposal, championed by SEIU-UHW union president Dave Regan, is framed as a response to the loss of federal healthcare funding under the One Big Beautiful Bill Act signed into law by President Donald Trump in 2025. With an estimated 200 to 250 billionaires in California and roughly $1 trillion in collective net worth, the ballot measure—Proposition 40—has attracted national attention and provoked the most expensive referendum battle in the state's history.

The billionaires have responded. Google co-founder Sergey Brin has committed $82 million to a campaign group called Building a Better California, which has collected more than $118 million in opposition funds as of July 2026. Venture capitalists John Doerr and Michael Moritz, along with founders of Stripe, Affirm, and DoorDash, have all written seven-figure checks to the effort. In total, at least $129 million has been raised from billionaires to defeat the measure. Brin's group has also placed two spoiler proposals on the ballot, one of which would prohibit taxes on retirement holdings and personal savings. That spoiler polls at 76 percent support when described in those terms, while the wealth tax itself sits at roughly 55 percent in some polls. If both pass, the measure with the higher vote share prevails, and the spoiler could nullify the wealth tax despite majority support for taxing billionaires.

But the billionaire response is not limited to campaign donations and spoiler ballots. Several of California's wealthiest residents have left the state entirely. Brin now lists his residence as Nevada in campaign finance filings, having reportedly transferred business assets and purchased a home on the Nevada side of Lake Tahoe before the January 1, 2026 residency snapshot date. Larry Page and Peter Thiel have also relocated—Page to Florida and Thiel to Nevada—while Travis Kalanick posted video of his move to Texas. A wealth adviser named David Lesperance told the Financial Times he has helped seven billionaires leave California since the proposal became public.

These departures generate headlines. But the billionaires are not the canary in the coal mine. They are the eagle. The canary is the LLC owner in Riverside who processes $3 million in annual revenue and cannot absorb another tax increase. It is the professional services firm in San Jose that has watched its effective state tax burden approach 15 percent. It is the e-commerce company in Los Angeles whose founder, facing a top marginal individual income tax rate of 14.4 percent (13.3 percent income tax plus 1.1 percent uncapped payroll tax), has concluded that the math no longer works.

The data confirm what the headlines suggest but understate. The Public Policy Institute of California reported that approximately 3 percent of all businesses relocated out of the state in recent years, the highest rate in recent history. The U.S. Bureau of Labor Statistics and PPIC data show California experienced a net loss of hundreds of business headquarters between 2011 and 2021, with an accelerating trend post-2017. The California Department of Finance estimates a net domestic migration loss of approximately 216,000 people in the year ending July 2025. The state's budget has swung from a $97 billion surplus in 2021–2022 to a projected deficit of $46.8 to $70 billion in 2025–2026, driven in large part by the loss of income tax revenue from departing high earners and the capital gains volatility that accompanies their exits. California ranks 48th on the Tax Foundation's 2026 State Tax Competitiveness Index. The state is one of only four to impose an alternative minimum tax on corporations. It is the only state to deny all net operating loss carryforwards (currently suspended at $0) and the only state that still uses the outmoded ACRS depreciation system rather than MACRS for corporate taxation.

Governor Greg Abbott's office reports that since 2020, more than 200 companies have relocated to Texas, with roughly half originating in California. Eight of the ten Fortune 500 companies that moved to Texas in the last six years came from California. Those are the household names: Tesla, Chevron, Oracle, SpaceX, and X (formerly Twitter). What they represent, however, is a visible fraction of a far larger movement. For every Tesla, there are hundreds of LLCs, S corporations, and professional associations whose owners have read the same Tax Foundation rankings, consulted the same CPAs, and reached the same conclusion.

The proposed wealth tax accelerates that calculus. Venture capitalist Chamath Palihapitiya has called the measure an "everyone tax," arguing that the California legislature will inevitably repeat and extend it to less wealthy residents. Economist Emmanuel Saez of UC Berkeley, who helped design the proposal, conceded the point from the opposite direction: if the measure passes, it makes future wealth taxes, including permanent ones, more probable, at the state and federal level. Michael Moritz asked the question that owners of mid-size businesses have already answered for themselves: "Have you ever heard of a one-time tax?"

The small- and medium-sized business owner does not need to be a billionaire to feel exposed, and many of them are seeking advice on how to transfer a business out of California. The owner of a $10 million business in California pays an 8.84 percent corporate income tax. In Texas, that tax does not exist; instead, a franchise tax applies only to entities with revenue exceeding $2.47 million, at an effective rate of 0.375 to 0.75 percent of revenue. The owner's personal income faces a top marginal rate of 14.4 percent in California. In Texas and Florida, that rate is zero. California requires nonresidents to file income taxes if they work a single day in the state. It does not allow accelerated first-year expensing for many assets. It has a throwback rule that exposes in-state businesses to additional corporate tax liability for certain out-of-state income that would not be taxed elsewhere. For a business generating $10 million in annual profit, the difference in state-level tax burden between California and Texas or Florida represents hundreds of thousands of dollars per year in retained earnings.

These owners are not relocating on impulse. They have been watching the numbers for years. The proposed wealth tax is not the cause of their departure; it is the confirmation that the trajectory will not reverse. When a state's response to a budget deficit caused by taxpayer flight is to propose a new tax on remaining taxpayers, the signal to remaining taxpayers is unambiguous.

The legal mechanism for relocating a business entity from one state to another without dissolving and reforming it is called statutory conversion, or redomestication. The process allows an LLC, corporation, or other entity to transfer its state of formation from the origin state to the destination state while retaining its existing name, employer identification number, contracts, bank accounts, and credit history. The entity that exists after the conversion is the same legal entity that existed before the conversion. It carries forward all prior rights, obligations, and liabilities. No contracts are voided. No tax elections are terminated. No new employer identification number is required.

This is distinct from foreign qualification, which merely registers an entity in a new state while leaving it domiciled in California, and from the dissolve-and-reform approach, which terminates the entity and all its contractual and tax relationships. Statutory conversion is the only method that severs the entity's domiciliary relationship with the origin state while preserving legal continuity.

The process requires coordinated filings with both the origin and destination state secretaries of state, a legally drafted Plan of Conversion, member or shareholder consents, and compliance with the entity formation requirements of the destination state. Both jurisdictions' requirements must be satisfied. The filing sequence matters. Errors in substance, timing, or order can produce a rejected filing, loss of good standing, or inadvertent dissolution, the last of which terminates the entity and exposes members to personal liability and federal and state taxable events.

Texas and Florida remain the two most common destination states for California conversions. Neither imposes a state-level personal income tax. Both permit inbound statutory conversions and process them with relative efficiency. Florida adds no corporate income tax for pass-through entities. Texas imposes a franchise tax on entities with revenue exceeding $2.47 million, but the effective rate (0.375 to 0.75 percent of revenue) is a fraction of California's combined burden, and most small- and medium-sized businesses pay no entity-level income tax at all in Texas. Other popular destinations include Nevada, Wyoming, Tennessee, and South Carolina, each of which has attracted net inbound business migration in recent years.

The California wealth tax ballot may pass or fail in November. Betting markets give it less than a one-in-three chance of becoming law, with prediction markets like Polymarket and Kalshi pricing passage at 18 to 35 percent as of mid-2026. But the significance of the measure extends beyond its immediate outcome. If it passes, it establishes a precedent for state-level wealth taxation in the United States and, by Saez's own admission, makes future iterations more likely. Similar proposals are being championed at the federal level by Sen. Elizabeth Warren and others with a lower threshold: $50 million instead of $1 billion.

If the California measure fails, it fails because billionaires spent $129 million and deployed spoiler ballots to defeat it, which does not resolve the underlying fiscal gap or the political incentive to propose similar measures in future budget cycles. In either scenario, the signal to small- and medium-sized business owners is the same. California's tax trajectory is not reversing. The tools to relocate a business entity to a more favorable jurisdiction exist. They preserve the entity's legal identity, contractual relationships, and federal tax status. The question is not whether the exodus will continue. It is whether a business owner will act before the next proposal or after it.