Dem
53
Ties
2
GOP
45
California voters will vote next month on a ballot measure, Prop. 40, to tax the assets of billionaires who live in California. Not surprisingly, some billionaires are trying to avoid the tax by leaving California—often for Texas or Florida, which have no state income tax. Experts on tax avoidance say that the number of people who really cut all their ties with some state (or country) and fully move to another one is not all that large. People who are used to the good life in the Bay Area can buy a house in Miami, but most of them don't actually want to live there because their families, friends, favorite restaurants, cultural activities, businesses and more are still in California. And the (usually) mild California climate doesn't exist in Texas or Florida. Nor is San Francisco a mosquito-infested swamp. What the billionaires want to do is pretend to move by buying a house in Texas or Florida, registering to vote there, and getting license plates from that state and then claiming they live there. The California Franchise Tax Board (FTB) is onto this game and it will be quite a cat-and-mouse game if the measure passes. The polls are mixed; the vote could go either way.
The measure taxes billionaires who lived in California on Jan. 1, 2026, so any billionaire who started moving after that is out of luck, no matter how diligent and thorough he or she is about the move now. But even for billionaires who saw this coming, fighting the FTB won't be easy because just buying a house and registering to vote elsewhere won't do the job. There is a substantial amount of case law dealing with residence, some of it going back to a 2003 case involving rancher Stephen Bragg, who claimed to have moved to Arizona. What the case law says is that what matters is not where you are registered to vote, but "the center of your life," which encompasses the following factors, and more:
Some billionaires may be tempted to lie about these factors, but the FTB has many tools available, especially subpoena power. For example, the first item in the list above is important. How much time does the person spend in California? Lying is easy. Getting away with it, not so much. Billionaires tend to make calls all the time and phone company records show which cell tower picked up the call. Swearing under oath you spent all of March in Miami when phone records show many calls in March originating in San Francisco could lead to a perjury charge. Credit card statements for purchases in California restaurants, stores, theaters and other things don't lie. Executives at a billionaire's company can be deposed under oath and asked about meetings they had where the billionaire was present. The date and location the billionaire signed contracts can usually be found. Records from the hated Flock cameras can be subpoenaed. And much more.
Shail Shah, a former auditor at the FTB, said California billionaires fall into three buckets. First, some don't think the measure will pass and aren't doing anything about it. Second, some see it coming but realize they were clearly California residents on Jan. 1, so it is too late to do anything. Third, others have begun "moving" out of state already and will challenge the Jan. 1 effective date in court, claiming it should be Election Day (Nov. 3) and that retroactive dates aren't legal. Of course, they had better have severed all ties with California by Nov. 3. For many of them, still being the CEO of a company headquartered in California is a giant red flag to the FTB. Of course, it may be possible to move the whole company to Texas or Florida, but many mosquito-averse key employees may refuse to move, badly damaging the company.
If Prop. 40 passes, expect years of litigation. It will probably be in state courts rather than federal courts since this is purely an issue of state taxation and the California Supreme Court may get the final word. (V)