Marginal tax rates in California's proposed billionaire tax

On October 21, 2025, labor union SEIU United Healthcare Workers West submitted the "2026 Billionaire Tax Act" (California Initiative 25-0024) to California Attorney General Rob Bonta for title and summary preparation. The initiative would impose a one-time 5% tax on the net worth as of December 31, 2026 of California residents with wealth exceeding $1 billion.

The tax structure creates marginal tax rates on wealth between 50% and 60% during the $1.0-$1.1 billion phase-in range. This occurs because the tax applies to total wealth rather than only wealth exceeding $1 billion, causing rate increases to affect all accumulated wealth.

The statutory text specifies:

For individuals and trusts on whom tax is imposed... the tax imposed is 5 percent of the net worth of such individual or trust. In the case of an individual (other than a trust) having net worth less than $1.1 billion ($1,100,000,000), the tax imposed by this Section shall be reduced by 0.1 percentage point (but not below zero) for each $2 million ($2,000,000) by which such person's net worth falls below $1.1 billion ($1,100,000,000).

This creates a stepwise rate schedule. At exactly $1.0 billion, the tax rate is 0% and total tax is $0. At $1.1 billion, the rate reaches 5% and total tax is $55 million. Taxpayers can spread payments over five years, though the liability remains based on wealth as of December 31, 2026 regardless of subsequent wealth changes.

Multiplying wealth by the tax rate yields total tax liability. For example, at $1.1 billion, the 5% rate produces $55 million in tax ($1.1B × 5% = $55M). At $2.0 billion, the tax is $100 million ($2.0B × 5% = $100M). The chart below shows the full tax liability schedule.

The marginal tax rate measures how much additional tax results from a wealth increase. It equals the change in tax divided by the change in wealth.

Because the tax applies to total wealth rather than only wealth above $1 billion, each 0.1 percentage point rate increase applies to all accumulated wealth, creating marginal rates between 50% and 60% in the phase-in range.

Initial wealth	Initial rate	Initial tax	New wealth	New rate	New tax	Change in wealth	Change in tax	Marginal rate
$1.000B	0.0%	$0M	$1.1B	5.0%	$55.0M	$100M	$55.0M	55%
$1.000B	0.0%	$0M	$1.002B	0.1%	$1.0M	$2M	$1.0M	50%
$1.098B	4.9%	$53.8M	$1.100B	5.0%	$55.0M	$2M	$1.2M	60%
$1.100B	5.0%	$55.0M	$1.102B	5.0%	$55.1M	$2M	$0.1M	5%

The marginal rate increases from 50% to 60% across the 50 discrete $2 million increments in the phase-in range, averaging 55%. Above $1.1 billion, the marginal rate drops to 5%.

The initiative requires 874,641 valid signatures by June 25, 2026 to qualify for the November 2026 ballot.