Federal efforts to tax the ultra-wealthy have gained significant momentum in 2026, with Senator Bernie Sanders and Representative Ro Khanna introducing the “Make Billionaires Pay Their Fair Share Act” in March, proposing a 5% annual wealth tax on America’s 938 billionaires. Meanwhile, the trajectory of state-level taxation has proven more complicated: Washington’s millionaire income tax survived a Supreme Court challenge that would have killed it through referendum, but the path forward remains contested as California prepares to vote on its own billionaire wealth tax in November.
The Sanders-Khanna proposal would target the nation’s wealthiest individuals directly, taxing their total wealth rather than just income from that wealth. The 938 billionaires in the United States, collectively worth $8.2 trillion, would owe 5% of that wealth annually under the proposal. This federal momentum stands in contrast to the state-by-state patchwork that has historically characterized American wealth taxation, though some states like Washington and California are now pushing ahead with their own measures despite potential voter backlash and legal challenges.
Table of Contents
- What Would Billionaires Really Pay Under the Federal Proposal?
- How the $4.4 Trillion Revenue Plan Would Fund Direct Payments
- Washington’s Millionaire Tax Survives the Supreme Court Referendum Battle
- California’s Billionaire Wealth Tax Reaches the November 2026 Ballot
- Why Valuation and Enforcement Pose Critical Challenges
- Massachusetts Millionaire Surcharge and the Broader Tax Shift
- Current Status of Wealth Taxation Across States
- Frequently Asked Questions
What Would Billionaires Really Pay Under the Federal Proposal?
The Sanders-Khanna “Make billionaires Pay Their Fair Share Act,” introduced on March 2, 2026, represents one of the most ambitious wealth tax proposals in recent U.S. history. It targets 938 billionaires whose combined wealth exceeds $8.2 trillion. Unlike traditional income taxes that tax only earnings, this proposal would impose a 5% annual tax on the total net worth of these ultra-wealthy individuals, creating a direct wealth reduction mechanism regardless of whether that wealth generates annual income.
Consider a billionaire with a net worth of $10 billion: under this proposal, they would owe $500 million annually in taxes. The proposal’s architects argue it addresses a fundamental inequity in the current system. Billionaires can legally reduce their tax burden by borrowing against appreciating assets rather than selling them, a strategy unavailable to ordinary workers who must pay taxes on wages immediately. A person earning $100,000 in salary pays federal income tax on that full amount; a billionaire with $100 billion in assets potentially pays tax on virtually nothing if they generate income through non-taxable means like unrealized appreciation or tax-free borrowing.
How the $4.4 Trillion Revenue Plan Would Fund Direct Payments
Proponents project that the wealth tax would generate $4.4 trillion in federal revenue over the next decade, a transformational sum that would reshape federal spending priorities. More immediately, the first year of the tax would fund direct payments of $3,000 to every person in households earning $150,000 or less annually—or $12,000 for a family of four. This dual structure combines wealth extraction with direct benefit distribution, framing the tax as both a wealth-redistribution tool and an economic stimulus mechanism targeting working families.
A family of four earning $150,000 combined would receive the full $12,000 payment, while a single individual earning $70,000 would receive $3,000. However, wealth taxes face significant implementation challenges that could reduce actual revenue collection well below projections. Several European countries—France, Sweden, and Spain—attempted wealth taxes in the 1990s and early 2000s but abandoned them due to high administrative costs, valuation disputes, and capital flight, with some generating less revenue than the cost of administering them. The IRS would need substantial expansion to enforce a federal wealth tax effectively, and that expansion cost must be subtracted from the $4.4 trillion projection.
Washington’s Millionaire Tax Survives the Supreme Court Referendum Battle
While federal momentum builds, state-level efforts have shown more resilience than some expected. Washington State enacted a millionaire income tax in 2026 with a 9.9% rate on household income exceeding $1 million, set to take effect on January 1, 2028, with first revenue collection occurring in April 2029 for the 2028 tax year. A household earning $2 million would owe approximately $90,900 on the income exceeding the $1 million threshold—a substantially higher burden than under previous state tax structures.
When opponents sought to block the law through a citizen referendum, the Washington Supreme Court issued a unanimous ruling exempting the millionaire tax from public referendum on grounds of government necessity. This decision removed a significant threat to the law’s existence, though it also raised questions about the appropriate limits of direct democracy when fundamental tax questions are involved. The ruling effectively locks the tax law into place, providing the state with revenue certainty—a luxury most tax proposals never achieve.
California’s Billionaire Wealth Tax Reaches the November 2026 Ballot
California is pursuing its own distinct approach with a billionaire wealth tax that qualified for the November 3, 2026 ballot on June 17, 2026. The California measure would impose a one-time 5% tax on net worth exceeding $1 billion, with the eligibility cutoff date of January 1, 2026. Any individual whose wealth exceeded $1 billion as of that January date would owe 5% of the total value of assets exceeding the $1 billion threshold.
The revenue would fund state healthcare through Medi-Cal expansion, food assistance programs, and public education—providing specific directives for how the money would be spent. California’s ballot measure differs significantly from the federal proposal in that it is one-time rather than annual, targeting wealth accumulated as of a specific date. If passed, it would represent a major victory for wealth-tax proponents at the state level, though ballot initiatives remain subject to voter approval and California’s measure could still fail. California’s measure also highlights an important concentration issue: the wealthiest billionaires, many concentrated in Silicon Valley and Los Angeles, would bear the tax burden, potentially creating pressure for federal action to establish uniform rules across states and prevent wealthy individuals from relocating to avoid taxation.
Why Valuation and Enforcement Pose Critical Challenges
A critical unresolved question for any wealth tax—federal or state—concerns the valuation and assessment of illiquid assets. A billionaire’s net worth typically includes stakes in private companies, real estate holdings, art collections, cryptocurrency, and other assets without clear market prices. The Internal Revenue Service already struggles with valuation disputes on estates involving these same asset categories; a wealth tax would require annual valuations of all assets above the threshold for the Sanders-Khanna proposal, or initial valuations for the California ballot measure.
The Sanders-Khanna bill’s proponents suggest using conservative valuations with self-reporting mechanisms similar to existing gift and estate tax systems, including penalties for undervaluation. Critics counter that this creates powerful incentives for aggressive undervaluation and could require IRS expansion costing billions annually, potentially reducing the net revenue gain significantly. Valuation disputes over a billionaire’s stake in a private company held by only a handful of investors could spawn years of litigation, creating administrative costs that dwarf the revenues for smaller fortunes near the threshold.
Massachusetts Millionaire Surcharge and the Broader Tax Shift
Massachusetts established the nation’s first significant millionaire surcharge in 2023, imposing a supplemental tax on high earners that represents the model several other states are considering. The surcharge operates as an additional income tax on earnings above a specified threshold, differing from both California’s one-time wealth tax and the federal proposal’s annual wealth approach. This layered approach—combining traditional income taxation with supplemental surcharges for the ultra-wealthy—has become a common state strategy.
However, this state-level momentum toward taxing the wealthy masks a broader national retreat: more than 20 states have actually reduced their top marginal income tax rates on the wealthy since 2021. Kansas, Louisiana, and others have pursued aggressive tax-cutting agendas aimed at attracting high-income residents, creating a direct conflict with states like Massachusetts, Washington, and California. This tax competition, with some states racing to the bottom while others race upward, suggests that a federal minimum taxation framework—like the Sanders-Khanna proposal—may be the only way to prevent wealthy individuals from simply relocating to tax-friendly jurisdictions.
Current Status of Wealth Taxation Across States
The federal wealth tax proposal introduced March 2, 2026 by Sanders and Khanna remains in committee as of mid-2026. Washington State’s millionaire tax, enacted and set to take effect January 1, 2028, will mark the first concrete state implementation of high-earner taxation designed for ongoing revenue collection, with first revenue collection occurring April 2029 for the 2028 tax year. The 9.9% rate on household income exceeding $1 million establishes a specific benchmark for state-level wealth taxation.
Three states now occupy the forefront of wealth taxation policy: Washington with its enacted millionaire income tax, Massachusetts with its millionaire surcharge in place since 2023, and California with a billionaire wealth tax awaiting the November 2026 ballot. Meanwhile, more than 20 states have reduced their top marginal income tax rates on the wealthy since 2021, demonstrating that the nation remains fundamentally divided over taxation of high earners. This creates a patchwork system where some states actively redistribute wealth while others actively compete to attract wealthy residents through lower tax rates.
Frequently Asked Questions
How is a wealth tax different from an income tax?
An income tax applies to earnings and wages annually. A wealth tax applies to total accumulated assets, regardless of whether they generate income. The Sanders-Khanna proposal taxes 5% of a billionaire’s net worth yearly, while Washington’s tax applies only to income above $1 million.
Could billionaires simply leave the country to avoid a federal wealth tax?
Possibly, though the U.S. taxes citizens on worldwide income regardless of residence. Enforcement would depend on asset location and international cooperation. Other democracies that attempted wealth taxes did see some capital flight, which is a key reason several countries abandoned their wealth tax programs.
When would these taxes actually start collecting revenue?
The Sanders-Khanna proposal has not passed Congress. Washington State’s millionaire tax takes effect January 1, 2028, with first collections in April 2029. California’s one-time tax (if passed in November 2026) would collect revenue in a single year, not ongoing.
Would middle-class families really get $3,000 or $12,000 checks?
That would depend on the Sanders-Khanna bill passing and being implemented as written. The $3,000 individual/$12,000 family payment is the proposed use of first-year revenue, but no actual payments would occur without passage.
Why would states pass millionaire taxes when other states are cutting taxes?
Progressive states argue that raising revenue from the wealthy is necessary to fund education, healthcare, and services. Conservative states counter that lower taxes attract high-income residents and businesses. This tax competition between states reflects a core tension in American federalism.
What happened with the Washington Supreme Court ruling on the millionaire tax?
The court ruled that the millionaire tax could not be challenged through a citizen referendum, exempting it from that democratic process on grounds of government necessity. This protected the law from a ballot challenge and effectively secured its implementation.