At 23, Emil Barr is already a millionaire building a business in Columbus, Ohio. But San Francisco’s investors and AI scene caught his eye—enough that the Flashpass founder told Fortune he signed a lease to move there about a year ago.
He changed his mind after looking more closely at California’s regulatory and tax environment, including its proposed billionaire wealth tax, which helped persuade him to cancel the move entirely. He wouldn’t owe the tax under the current proposal, but fears it could pave the way for taxes on millionaires like him.
“I think it was less of a matter of immediate finances,” Barr told Fortune. Instead, he pointed to what he described as California’s “anti-entrepreneurial” political rhetoric.
His decision raises the question dividing California: would taxing its biggest fortunes help pay for essential services, or make the state a less attractive place to build a business? Barr sees it as a warning sign, but supporters see a way to protect healthcare without sacrificing the talent and investment that draw businesses there. The debate has national stakes too. States invest in the public services that help businesses grow, but can lose the chance to tax some of that wealth when residents move before cashing out.
Billionaire flight gets the attention, but wealth can leave in quieter ways. Founders like Barr can choose where to build before their fortunes are big enough to tax, and residents who already have them can move before cashing out. States invest in the public services that help businesses grow, but can lose the chance to tax that wealth when it moves. The debate has national stakes, too.
Proposition 40, on the Nov. 3 ballot, would impose a one-time 5% tax on qualifying billionaires who were California residents on Jan. 1, 2026. It would tax accumulated wealth rather than annual income, with most of the revenue going toward healthcare.
The measure has drawn support from six Nobel Prize-winning economists, including Joseph Stiglitz, Paul Krugman, and Daron Acemoglu. In a September letter, they argued that the tax would be modest compared with billionaires’ wealth gains and would help replace lost federal healthcare funding while supporting public services important ot California’s economic growth.
A billionaire tax, a millionaire’s cold feet
Flashpass builds technology that helps government agencies connect people with work, including people displaced by AI, Barr said. He moved to Columbus because Ohio was the first state to use its software.
San Francisco initially appealed to Barr as the place to be because it’s closer to investors and AI companies. He hadn’t decided whether to move Flashpass’s headquarters there, but planned to relocate himself—until California’s regulatory and tax climate changed his mind.
“I’m not 100% sure I’m going to stay in Ohio and keep building the business in Ohio,” Barr said. “But I am 100% sure that I wouldn’t build a business in California.”
He argues that political hostility toward entrepreneurs could discourage them from building businesses beyond California too. “If we keep villainizing entrepreneurs, entrepreneurs aren’t just going to leave California; they’re going to leave America,” Barr said.
His decision hasn’t ended his company’s California ties altogether, though. He says Flashpass still has employees and investors there, and he continues traveling to the state. He also leaves room for higher taxes, while arguing that the approach matters.
“Maybe the solution is paying higher taxes and updating the tax code, but it needs to be done in a more nuanced, progressive way,” he said, declining to suggest any specifics.
Barr isn’t alone in opposing it. Gov. Gavin Newsom opposes the measure, and Google cofounder Sergey Brin has helped fund the opposition.
Why supporters dispute the investment threat
Not every billionaire sees the proposal as a reason to reconsider California as a whole. In a January Bloomberg podcast, Nvidia CEO Jensen Huang said he was “perfectly fine” with the proposed tax, pointing to Silicon Valley’s talent pool as the reason the company works there.
Debru Carthan, vice president of SEIU-United Healthcare Workers West, the union backing the measure, rejected concerns that the proposal would drive away wealthy residents or investment. The campaign argues the tax would help replace roughly $100 billion in federal healthcare funding it says California will lose over five years.
“This scare tactic just doesn’t stand up to scrutiny,” she said in a statement to Fortune. “There’s more money and investors coming into California now, not less.”
Carthan pointed to Massachusetts and Washington, arguing that their taxes on wealthy residents have raised billions for public services while their high-income populations have continued to grow. Those policies differ from California’s proposed one-time wealth tax, but the union presents them as evidence against predictions of an exodus.
She argued that the more immediate threat is the loss of federal healthcare funding.
“That’s the real crisis our state is facing,” she said, warning that without additional funding, clinics would close, hospitals would lay off workers, and Californians could lose coverage or face higher premiums.
The measure would direct 90% of its revenue to healthcare. The nonpartisan Legislative Analyst’s Office estimates it would raise tens of billions of dollars over several years. It also expects taxpayer responses, including some departures, could reduce ongoing income-tax revenue by less than $1 billion annually.
What migration research can—and can’t—tell us
Cornell sociologist Cristobal Young, who has spent nearly two decades studying how taxes affect migration among high earners, says fears of wealthy people fleeing higher taxes are often exaggerated.
“The more money you make, the less likely you are to move,” Young told Fortune.
Successful high earners tend to live where they built their careers, with business partners, professional networks, and family ties that make moving costly.
“All of a sudden, you’re in a new professional environment, and now you’re more of an outsider,” he said.
Young also said that people’s objections to a state’s taxes do not always explain where they actually live or start a business. Their existing roots, business partners, and customers can matter more.
He began studying tax migration using New Jersey tax returns after its 2004 income-tax increase on high earners. Even with lower-tax Pennsylvania nearby, he said, the research did not find the departure pattern critics feared. A 2016 study he coauthored, examining 45 million tax records over 13 years, likewise found limited millionaire tax flight.
But Young said those findings don’t necessarily predict what would happen in California. A large tax on accumulated wealth differs from adding a few percentage points to annual income taxes.
“We haven’t passed a tax like this before in the U.S.,” he said.
He said the spread of taxes on high earners across states also matters because as more states adopt them, moving to avoid them becomes less straightforward.
“As more and more the neighbors adopt millionaire taxes, you know, where are you going to go?” he said. “Well, you can always go to Texas, but those are long-distance moves.”
Young doubts a billionaire wealth tax would spread as widely because most states lack California’s concentration of billionaires. That could leave a stronger incentive to move, he argued.
Tax scholars have proposed another way to address movement across state lines. In a California Law Review article, Brian Galle, David Gamage, and Darien Shanske argue that people can accumulate investment gains in one state, then move before selling their assets and triggering a tax bill. They propose taxing gains as they accumulate to reduce that avoidance.
Young believes the tax system’s unequal treatment of wages and investment gains is a real problem. Workers pay taxes as they earn wages, he said, while investors can defer taxes on rising stock values until they sell. He questions whether a one-time levy can solve it.
“It’s an ongoing problem. It’s a forever problem,” he said. “We need a forever solution.”
This story was originally featured on Fortune.com