The Tax on Goodbye
California wrote a tax that applies to people based on where they lived ten months before anyone votes on it. That detail matters more than the tax rates.
On November 3, Californians will vote on a one-time 5 percent tax on the net worth of the state’s billionaires. You have probably heard about it. What you probably haven’t heard is the detail buried in the initiative’s language: liability attaches based on residency as of January 1, 2026 — ten months before the election, and eleven months before the tax could possibly exist as law.
Read that again. The measure taxes people for where they lived on a date when the tax did not exist, had never existed, and might never exist.
You can move. Six of California’s billionaires already did, before the January 1 cutoff — Page, Brin, Thiel, Sacks among them, with Zuckerberg following to Florida. But if you were a California resident on New Year’s Day and the measure passes in November, the state’s position is that you owe the tax whether you’re in Sacramento or São Paulo. The drafters knew people would leave. They wrote the departure into the tax base.
I don’t care whether you have a billion dollars. Statistically, you don’t. What I care about — what you should care about — is the principle the drafting reveals. Because a state that writes retroactive residency anchors into a billionaire tax has told you something about how it thinks about departure itself.
It thinks departure is an event to be taxed.
What’s actually happening
Let me lay out the board as it sits in July 2026, because the billionaire measure is the loudest piece but not the only one.
Washington passed a 9.9 percent tax on household income over $1 million, effective 2028. Washington — the state whose entire competitive identity was no income tax — now has one of the highest top marginal rates in the country, on a two-year fuse. Starbucks’ chairman announced his own move to Florida around the time it passed, and the company’s registration is following him out.
Illinois is debating 3 percent on individual income over $1 million, stacked on a state already carrying some of the worst pension math in the country. Michigan has a ballot proposal at 5 percent on income over $500,000. Note the threshold. Five hundred thousand dollars is not a billion dollars. It is a surgeon married to an attorney. New York City’s new mayor has proposed pushing millionaire earners to 5.88 percent on the city tax alone, on top of state rates, and Albany keeps circulating mark-to-market proposals that would tax paper gains that were never sold, plus a surcharge on high-value second homes.
And threading through several of these proposals is a mechanism the coverage mostly skips: the trailing claim. Some drafts assert a state’s right to a portion of your income for years after you’ve established domicile elsewhere. Not a one-time settlement at the border. A tail. The policy term of art is “shadow period.” The honest term is a lien on your future in a place you no longer live.
The reframe: this is repricing, not revenue
Here’s the mistake most coverage makes. It treats each proposal as a revenue story — will it raise the money, will the rich flee, will the math work. The Hoover Institution ran the numbers on California’s measure and concluded that, after migration responses, it could cost the state roughly $25 billion in net present value. So no, the math mostly doesn’t work, and the legislators’ own economists could tell them so.
Which means the revenue frame is the wrong frame. The right frame is this: the price of leaving is being repriced, in statute, in real time.
For your entire life, the implicit deal in American federalism was that exit was free. You didn’t like California’s taxes, you moved to Texas, and the transaction was complete. Mobility between jurisdictions was the pressure-release valve of the whole system — the thing that disciplined state governments the way competition disciplines firms. Whatever you thought of your state, the door was unlocked, and nobody charged admission to walk through it.
That assumption is now under legislative attack in at least six states. Not successfully, yet, in most of them.
“It’ll get struck down” — the analysis you’re owed
The sophisticated objection to everything above is constitutional, and you should hear it before you hear my answer. Retroactive anchors look like ex post facto lawmaking. Trailing claims on people who no longer live in a state look like a due process problem, or a Commerce Clause problem, or both. Won’t the courts kill this?
Some of it, probably. Here’s the honest map.
The ex post facto argument fails at the door — the Supreme Court confined that clause to criminal law in 1798 and has never budged. Retroactive taxation is judged under due process, and the controlling case, United States v. Carlton (1994), sets a standard so forgiving that courts routinely bless retroactivity reaching back a year or more: the legislature needs only a legitimate purpose pursued by rational means, and your reasonable expectations, the Court said explicitly, don’t create a violation on their own. Where California is genuinely exposed is that Carlton protected retroactive amendments to existing taxes — the older cases struck down retroactive application of wholly new levies, and a wealth tax is as new as a tax gets. So the January 1 anchor may die. May.
But watch what survives even if it does, because the scheme is severable and the aggressive parts are the parts the trend needs least. Source-based taxation of former residents is black-letter law: California already taxes deferred compensation and installment gains for years after you leave; New York taxes remote workers who never enter the state, and the courts have let it. The trailing claim isn’t an invention — it’s an extension of a foundation that has been challenged and upheld for decades. The proposals lengthen the tail. The tail itself is settled law.
And don’t count on courts to hold the line under fiscal pressure, because we just watched one fold. Washington’s capital gains tax was, by any conventional reading, an income tax prohibited by that state’s constitution. In 2023 the Washington Supreme Court called it an excise tax and let it stand. When the money runs out, taxes get relabeled, not struck.
Then there’s the precedent that matters most for readers of this publication — the federal one. The United States has taxed departure since 2008. Section 877A imposes a mark-to-market exit tax on covered expatriates: your unrealized gains, deemed sold the day before you renounce. Eighteen years in force. Behind it stands Cook v. Tait (1924), which settled that America taxes its citizens’ worldwide income no matter where they live — meaning leaving the country doesn’t exit the tax system; only renunciation does, and renunciation triggers the exit tax that already exists. The one recent chance to knock the legs out from under mark-to-market taxation was Moore v. United States in 2024, and the Supreme Court declined to take it. The strongest constitutional argument against this entire family of taxes was on the table two years ago. The Court walked past it.
So no — I can’t predict the future, and I won’t pretend the California measure is durable law. What I can do is read the breadcrumbs, and they all point the same way. The states aren’t inventing a claim on your departure. They’re copying downward a claim the federal government has enforced for eighteen years and the Supreme Court recently declined to disturb. The outer constitutional boundary has been tested. It held. Everything now moving through the statehouses is infill.
One more thing about the litigation itself: even the provisions that eventually lose take five to eight years to die, and the anchor dates operate from day one. A family planning a 2027 departure lives entirely inside that window. “It will probably be struck down” is a prediction about 2031. It is not a plan for 2027.
The direction is unambiguous, and direction is what a planner prices.
One last piece of precision, because it changes the forecast. This is not a coordinated national campaign — there’s no cartel, no memo. It’s convergence: independent legislatures, all facing the same structural deficits, all discovering the same arithmetic, all reaching for the same instrument at roughly the same time. That distinction matters, because convergence driven by fiscal pressure doesn’t reverse with an election cycle. The deficits are structural. Pension obligations don’t lose ballot measures. Whichever party holds Sacramento in 2030, the money still won’t be there — and departure will still be the largest untaxed event on the board.
Thresholds migrate. They always migrate.
The standard reassurance is that these taxes target a few hundred people at the very top, and you are not one of them. The reassurance has a history problem.
The federal income tax of 1913 applied a 1 percent rate to the top fraction of earners; within five years the top rate was 77 percent and the base had swallowed the middle class. The Alternative Minimum Tax was designed in 1969 to catch 155 wealthy households; by the 2000s it was hitting millions of two-income professional families until Congress patched it annually out of embarrassment. A tax instrument, once built, does not stay pointed at its original target. The enforcement apparatus is the expensive part, and once a state has built the machinery to value and tax net worth — appraisers, auditors, litigation teams, information-sharing agreements — the marginal cost of lowering the threshold is a bill amendment.
Michigan already skipped the pretense and opened at $500,000.
So the question in front of a family with meaningful but unspectacular assets — a business, a portfolio, a house that appreciated for twenty years — is not “does the billionaire tax apply to me.” It’s “what does my state’s departure tax look like by the time I actually leave, and what does the trailing claim look like on the income I earn afterward.” The answer depends almost entirely on when the leaving happens. Every proposal on the board prices departure higher next year than this year. None of them price it lower.
This is the part where the timeline stops being abstract. A move that severs domicile cleanly takes 12 to 24 months to execute properly — the severance itself, the sequencing of accounts and property and filings, the documented facts a residency auditor will actually accept. The families treating optionality seriously aren’t reacting to November’s ballot. They started the clock early precisely so that whatever passes, they’re on the right side of the anchor date — because the single lesson of California’s measure is that the anchor date arrives before the law does.
What actually bites today
Analytical honesty requires this section, so here it is: as of today, no US state has an enacted exit tax on individuals. The billionaire measure hasn’t passed. The trailing-claim drafts are drafts. If someone sells you urgency on the premise that an exit tax is already law, they are selling you something else too.
What is already law — and already biting — is the domicile audit. California’s Franchise Tax Board, New York’s Department of Taxation, and their counterparts in Massachusetts and Connecticut do not accept your word that you left. They audit the facts: where your spouse sleeps, where your dentist is, where the dog is registered. The state’s first answer to “I no longer live here” is prove it, and the standard of proof is higher than nearly everyone assumes. I wrote about that machinery in May — the California problem — and everything in it still holds. The residency audit is the exit tax that already exists. It’s just collected in legal fees and back assessments instead of a clean 5 percent.
What the 2026 proposals change is the trajectory. They take a claim states have always pressed quietly through audit and begin writing it loudly into statute — with anchors that reach backward and tails that reach forward. The machinery of “you can’t just leave” is being upgraded from administrative practice to legislative architecture.
You are watching the price of the door go up while the door is still open.
That’s the whole piece, really. Not panic — arithmetic. The cost of staying in a high-tax state is knowable and rising. The cost of leaving is currently low and legislated to rise. Two curves, both moving against you, and the gap between them is the price of waiting.
The exit was never going to stay free forever. Nothing that valuable ever does.
Borderless Living provides analysis and education, not legal, tax, or estate-planning advice. State residency and tax outcomes turn on individual facts. Before acting on anything discussed here, retain qualified counsel licensed in the relevant jurisdictions.
The visa, the apostilles, the background check — those are the easy part. People get all of that right and still end up in trouble. Even people with accountants, lawyers, and wealth managers.
What goes wrong is further back. A decision that looked perfect ten moves ago, arriving now as a tax bill, a letter from a government, a check you didn’t plan to write. And nobody had to do anything wrong. They just never saw the whole board.
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