Workers load crates into an art storage facility; crew members provision a large yacht at a marina.
Wealthy Californians are reportedly exploring various methods to minimize the impact of a proposed one-time 5% tax on assets exceeding $1 billion. Rather than pay the potential tax to the state government, some high-net-worth individuals are opting for strategies such as increased charitable donations, purchasing high-value tangible assets like art and yachts, and restructuring their real estate holdings.
The California Billionaire Tax Act, if approved by voters in November, would target approximately 200 residents. The tax is slated to be due in 2027, with payments potentially spread over five years. Crucially, any individual who was a California resident on January 1, 2026, would be subject to the tax, regardless of their residency status at the time of payment.
According to a report in The Wall Street Journal, some clients are choosing to direct funds to charities they believe will utilize them effectively, rather than entrusting them to the state government, citing a lack of confidence in how Sacramento might spend the tax revenue. Andrew Katzenstein, a partner at HCVT, noted that such proactive tax planning is common when tax laws are expected to change.
Beyond philanthropy, other strategies include acquiring tangible assets like art and yachts and keeping them outside California for at least 270 days annually to legally avoid the tax. Additionally, individuals are considering restructuring their balance sheets, delaying private funding rounds, and moving real estate holdings from corporate LLCs into personal names or revocable trusts to shield their property.
This trend of wealthy individuals seeking to reduce their tax exposure in California comes as several prominent figures, including tech moguls like Larry Page, Sergey Brin, and Mark Zuckerberg, have relocated their primary residences or businesses out of the state. This preemptive action aims to ensure they are not residents on the January 1, 2026, deadline for the proposed tax.
A poll by the Public Policy Institute of California in May indicated that about 54% of the state’s voters generally support the billionaire tax initiative.
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