National Billionaires Tax: Newsom Push Revives 40% Exit Tax Threat

A national billionaires tax is suddenly the loudest idea in American tax politics, and the man pushing it is the governor who refused to back one at home. Gavin Newsom used a June 26 essay to demand that Congress tax the richest Americans federally, days after California certified a 5% state wealth levy, which he opposes, for the November ballot.

WASHINGTON, D.C., United States – 03 July 2026

The essay landed hard. Newsom named the “buy, borrow, die” strategy directly, called it a tax-free lifestyle loan for the richest Americans, and urged Congress to shut it down. National coverage through the first week of July dragged Senator Elizabeth Warren’s wealth-tax bill, and its 40% exit tax, back into the spotlight.

What Did Newsom Actually Propose?

Newsom proposed a federal billionaires tax and an end to the “buy, borrow, die” loophole in a June 26, 2026 essay, arguing a state-level wealth tax would simply drive California’s richest residents to Texas or Florida. He offered no rate or threshold, just a demand on Congress.

That framing matters. Newsom is fighting the state initiative while asking Washington to do the same thing nationally, on the theory that you cannot flee a federal tax by moving to Miami. He wrote that “the wealthy have their own private tax code full of loopholes and exemptions.” The message to wealthy Americans is blunt: the exits inside the United States are being watched. The ones who act early on tax residency planning abroad keep their options open.

We have fielded more enquiries about US wealth-tax exposure in the past two weeks than in the entire first quarter. The pattern never changes: people ignore proposals until a sitting governor says the quiet part out loud, then they want a structure built by Friday.

How Would the 40% Exit Tax Work?

The 40% exit tax sits inside the Ultra-Millionaire Tax Act of 2026, reintroduced in March by Senator Elizabeth Warren and Representatives Pramila Jayapal and Brendan Boyle. Anyone worth over $50 million who renounces US citizenship would pay 40% of their wealth on the way out, on top of the bill’s 2% to 3% annual wealth tax.

Here’s the kicker: America already taxes people for leaving. Under IRC Section 877A, covered expatriates, broadly those with net worth above $2 million, are treated as having sold everything the day before they renounce, and taxed on the paper gain. The proposed 40% levy would sit on top of that logic and multiply it. Renunciations keep climbing anyway, helped by the US renunciation fee dropping to $450 this spring. The lesson: secure second citizenship programs before any exit-tax change lands, because these bills grandfather nothing.

Backers say the bill would raise $6.2 trillion over a decade, citing estimates from Berkeley economists Emmanuel Saez and Gabriel Zucman. Opponents call that heroic. Both sides agree on one thing: the 40% exit tax exists precisely because the drafters expect wealthy Americans to head for the door.

Buy, Borrow, Die: The Loophole That Started the Fight

The buy borrow die tax strategy is dead simple. Buy appreciating assets. Borrow against them to fund your lifestyle, because loan proceeds are not taxable income. Die, and your heirs inherit at a stepped-up basis that wipes out a lifetime of capital gains. No sale, no tax, ever.

Whether it deserves top billing is another question. A June 15 Tax Policy Center analysis found the strategy accounts for only 1% to 2% of the economic income of the top 1%, since the ultra-rich mostly hold assets and let unrealized gains compound untaxed. The loophole makes headlines. The compounding does the real work. That is why every serious proposal ends up taxing unrealized gains, not loans.

Where Does the California Billionaire Tax Fit?

The California billionaire tax qualified for the November 3, 2026 ballot on June 17, with 980,438 valid signatures. It would impose a one-time 5% tax on the net worth of billionaires living in California on January 1, 2026, payable in 2027, with real estate, pensions and retirement accounts excluded.

California’s own Legislative Analyst’s Office expects the measure to raise tens of billions, then warns in the same breath that departing billionaires could cost the state hundreds of millions in income tax every year afterwards. The state’s fiscal watchdog is conceding that wealth flees wealth taxes. One client put it to us this way last week: the measure targets a few hundred people, but the precedent targets everyone with assets worth protecting. Hard to argue.

Three US Wealth Levies Compared

Would a National Billionaires Tax Actually Pass?

A national billionaires tax faces long odds in this Congress and a near-certain constitutional challenge if it ever passes, because taxing unrealized wealth tests the Sixteenth Amendment’s definition of income. The Tax Policy Center notes a straight rate increase would be far easier to defend.

So why care? Because the political floor keeps rising. Washington State enacted a millionaires’ income tax this year, and Massachusetts has had one since 2023. The EU is tightening beneficial ownership register access, and Norway just showed how exit taxes evolve once wealth starts leaving. Let’s be blunt: exit taxes and wealth levies are always aimed at the people who waited.

Bottom line: a national billionaires tax is not law, the California measure has not passed, and the Ultra-Millionaire Tax Act is parked in committee. Momentum only points one way, though, and the people these proposals target gain the most from planning while everything is still just ink.