Aharon Friedman (Stanford University – Hoover Institution), Benjamin Jaros (Stanford University – Hoover Institution), and Joshua D. Rauh (Stanford Graduate School of Business) have posted The 2026 Billionaire Tax Act and the Constitution: Retroactivity, Residency, and the Limits of California’s Taxing Power on SSRN. Here is the abstract:
The 2026 Billionaire Tax Act (BTA), a California ballot initiative filed in October 2025, proposes a one-time 5% tax on the worldwide net worth of every individual whose net worth is $1 billion or more on December 31, 2026, and who was a California resident on January 1, 2026, and on applicable trusts. This paper argues that the BTA violates the United States Constitution: the BTA violates the Constitution’s Dormant Commerce Clause, Takings Clause, and Due Process Clause, and is also a Bill of Attainder. The BTA applies California’s income tax residency rules, which determine residency over an entire year, to determine residency as of a single day. The BTA uses this residency determination to claim a taxing right over 100% of worldwide accumulated assets, without any requirement that such assets have any connection to California. This approach could subject the same assets to substantial overlapping taxation by multiple domestic and foreign jurisdictions. Although the BTA grudgingly offers apportionment and tax credits in certain circumstances, those provisions are inadequate to save the BTA’s validity under the Constitution. The tax disregards basic principles of valuation to attribute to taxpayers assets they do not own, and to measure assets at well over their actual fair market value. The BTA prohibits the United States Congress from allowing a deduction against Federal income taxes for BTA taxes. These provisions suggest that the BTA’s primary intent may be to impose economic harm on certain taxpayers because of their political expressions and their wealth, decrease their influence, and drive them out of the state. And the BTA’s proponents have made clear they are targeting certain taxpayers. If enacted, we contend the BTA should be struck down because it violates the Commerce Clause, Due Process Clause, Takings Clause, and is a Bill of Attainder under the United States Constitution.
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