A Wealth of Evidence on Wealth Tax Consequences

Massachusetts continues to lose residents to lower-tax states, and the trend shows no sign of slowing. The latest U.S. Census Bureau migration data confirms what policymakers and voters feared – the Commonwealth’s high-tax environment is making it harder to retain residents, business, and investment in an increasingly competitive landscape. 

The data found that over the last four years, more than 790,000 residents left Massachusetts — a drop larger than the population of Boston. Even accounting for new residents who moved in, that translates to a net loss of 164,000 residents.

The top two destinations for former Mass. residents were lower-cost, lower-tax states of Florida and New Hampshire.

Despite this reality, activists in Massachusetts continue to insist that raising taxes on high-income residents carries little risk. But our experience tells a very different story. 

Policies like the state’s income surtax are already contributing to outmigration and weakening the tax-base – even as other states look to copy the model. Now, California might go even further through a new “wealth tax” ballot measure–and union leaders in Massachusetts want to adopt the model for the Commonwealth.

What is the California “Wealth Tax” Proposal?

A powerful labor union in California has proposed a ballot initiative known as the “2026 Billionaire Tax Act.”  The measure would impose a one-time tax on California residents with a net worth above $1 billion as of January 1, 2026.

Supporters are claiming it would plug holes in California’s Medicaid budget. But there has been an outcry of concern – and for good reason. The tax is calculated on net worth, an estimation of the value of non-liquid assets (e.g. items that have value but aren’t cash in your account), like business holdings, stocks, intellectual property, in addition to earnings. In practice, many would be forced to sell off their assets just to cover the tax bill.

As a result, some of California’s greatest economic drivers are considering leaving the state – a consequence Massachusetts is beginning to experience under its own tax of high-income residents.

Warning Signs Are Already Flashing

California’s billionaire tax is being marketed as a “one-time” levy, but that assurance offers little comfort in practice. Even the threat of one massive tax hit is creating strong incentives for wealthy residents and business owners to leave — taking investment, jobs, and future tax revenue with them.

In interviews with Free Press, twenty-one California billionaires–a substantial subset of the state’s impacted population–reported that the exodus is already underway. Nearly all business owners interviewed said they have begun planning offices or operations outside California, often pointing to states like Florida or Texas, and warned the tax could accelerate the departure of technology firms. 

An informal poll of billionaires found that roughly 15% have already left the state, like Google founders Sergey Brin and Larry Page, who have begun moving some of their business operations elsewhere. Another 70% said they would relocate if the initiative passes, taking their businesses and investment activity with them.  

The fiscal consequences of that flight are already substantial. According to venture capitalist Chamath Palihapitya, California has already lost an estimated $1 trillion from billionaires who have exited the state – capital that would otherwise support jobs, business formation, and future tax revenue. A Pacific Research Institute study estimates billionaires pay nearly a quarter of all income taxes in the state – California can’t afford to lose that revenue long-term.

Most European countries that have tried similar wealth taxes have repealed them, citing a declining tax base and lower overall revenue due to people moving away.

California Governor Gavin Newsom has also warned against the measure, citing risks to state revenues if high net worth residents take their wealth elsewhere, as well as concerns that businesses would begin questioning their investment in the state long-term. California, he noted, “lives in a competitive reality with 49 other states.”

The proposal, if passed, could also get tied up in legal challenges that will further complicate matters. One law firm identified eight potential constitutional and statutory issues with the tax that could put affected residents through additional uncertainty if it passes and ends up in court.

Massachusetts is already confronting similar questions, as policymakers weigh how higher taxes affect the state’s ability to retain residents, businesses, and investment in an increasingly competitive landscape.

Lessons From — and For — Massachusetts

Just the threat of enacting a “billionaire tax” has lost California billions of dollars. A similar threat – even if it never becomes a reality – could be devastating to Massachusetts’ economy. 

Massachusetts, like California, already ranks among the states with the highest tax burdens on residents and businesses. MOA polling found that high taxes are among the top reasons residents have considered leaving the Commonwealth. That sentiment is reflected in the latest Internal Revenue Service data, which show Massachusetts experienced a net loss of more than 45,000 taxpayers as of 2022 – the year the surtax on income over $1 million was enacted.

Instead of pushing this misguided policy further, Massachusetts has a chance to deliver relief to residents across income brackets. An MOA-inspired ballot measure expected to appear before voters in 2026 would lower the state’s income tax from 5% to 4% over three years. California and other states considered unprecedented tax hikes should take notes.