LA Resi Agents Sound off on Proposed Billionaire Tax

Really?

That’s what some in Los Angeles real estate are asking as proponents look to put a proposed billionaire tax onto the November ballot.

“This will be the icing on the cake and the most detrimental thing to happen to California, putting this billionaire tax proposal on the ballot and passing it,” The Agency Principal Santiago Arana said. “It will be very difficult to get back from that point.”

Branden Williams, co-founder and president of the Beverly Hills Estates, likened increasing costs in the state to a second-rate storyline.

“This is a bad comic book out of Batman and Gotham City and pretty soon the state’s going to lose everybody,” Williams said.

Even the whiff of the tax proposal has been enough to send some of the state’s wealthiest packing, kicking a real estate market that’s already been facing a confluence of challenges in recent years, including the city of Los Angeles’s two-tier Measure United to House L.A., insurance headwinds in the wake of the Palisades and Eaton wildfires, concerns over crime and homelessness, not to mention a shrinking customer base in the traditional pillar of the local entertainment industry.

“I don’t know why but, for some reason, California has just consistently made it more and more difficult for the wealthy to live here, which are the people who also contribute and stimulate the economy and pay higher taxes as it is,” said Carl Gambino, who helms the Gambino Group at Compass.

While not on the ballot, the 2026 Billionaire Tax Act is in the signature-gathering phase.

What’s on the table is a one-time, 5 percent tax on the assets of anyone living in the state as of Jan. 1, 2026 with a net worth in excess of $1 billion. The state’s Legislative Analyst’s Office estimated the impact to be on a “few hundred” individuals.

California would begin collecting in 2027, but payers would have the option of spreading that out over a five-year period. An individual who meets the minimum threshold of $1 billion would, for example, face a payment of $50 million regardless of whether the assets in question are liquid, such as cash, or illiquid, such as property.

A chief supporter of the bid for tax is the Service Employees International Union-United Healthcare Workers West (SEIU-UHW), with health care services billed as being in line for the largest share of revenue generated from the tax. Smaller streams would go to education and food assistance.

The Legislative Analyst’s Office has projected the possibility of the state getting a short-term boost in revenue from the tax, with an exodus of ultra-wealthy residents causing an eventual decline over the long haul.

Florida brokers who spoke to The Real Deal last month said they’ve already begun to benefit from some billionaires’ fears over the tax who are now headed to the state for their residential buys. That includes Google co-founder Sergey Brin. Meta founder and CEO Mark Zuckerberg, along with his wife Priscilla Chan, have reportedly been eyeing an Indian Creek Island spec mansion, also in Florida.

U.S. Senator Bernie Sanders from Vermont waived off any fears of an exodus as unproven.

The independent, who spoke at a rally Wednesday evening at The Wiltern to kick off a campaign in support of the tax, argued employers and the wealthy often use threats of fleeing to other states to stop policies or other actions from moving forward. He said companies do that to workers looking to unionize and some in New York City threatened the same when now-Mayor Zohran Mamdani was running for office.

“[New Yorkers[ didn’t [leave] and I doubt that they will flee the great state of California,” Sanders said during his speech.

Leaky market

If anyone knows the wealthy’s pattern of movement well, it would be Gambino, whose team is spread out across California, Florida and New York. The group recently expanded into Bucks County, Penn. — a wealthy “collar county” in the Philadelphia metropolitan area — as it looks to keep up with clients.

“Money is very movable, especially at that level,” Gambino said. “These people have homes all over the place as it is. They’re just not tied to California like they used to be.”

Clients have expressed concern about the tax, with Gambino saying he’s already seen several, particularly tech entrepreneurs, make the move to Florida. The exodus ramped late last year in the high-end as some sought to beat the Jan. 1 retroactive deadline should the tax end up on the ballot and pass.

The Gambino Group’s business in New York City is robust, despite any negative news around Mamdani, Gambino said. The same goes for the North Fork of Long Island and in Bucks County, there’s been an influx of entertainment industry professionals flocking to that submarket’s idyllic, farmhouse lifestyle.

For Williams, he’s referred business out of L.A. to places such as Nashville, Texas, Montana, Nevada and Arizona. Though he chalks up the departures to a bigger problem: “This isn’t the taxes; this is the corruption.”

“These people aren’t coming back,” he said. “They’ll come and visit California, but they’re not going to come back and claim residency.”

Other points of consideration

The rollout of Measure ULA might offer a good blueprint for cause and effect should a billionaire tax pass, some say.

The so-called mansion tax in the city of Los Angeles — 4 percent for all deals starting at $5.3 million and 5.5 percent for those $10.6 million or more — has impacted deal flow and construction financing across residential and commercial.

“They’re taxing the rich to give to the poor, which is a really great idea when it works, not when there is corruption,” Arana said of ULA’s impact. “They haven’t done anything for the homeless. It didn’t work.”

Proponents of ULA point out the tax has raised over $1 billion in revenue since its 2023 implementation. The measure originally estimated $600 million to $1.1 billion per year in revenue generated from the tax.

Thus, Arana’s skeptical of the efficacy a billionaire tax would have to fund health care services.

Even with the concerns, there’s always a flip side. Billionaires are not extinct in the market, he said. He’s now shown Ben Affleck and J.Lo’s former home at 2571 Wallingford Drive in Beverly Hills to 24 buyers. Eighteen of those were billionaires. The property was last listed for $52 million. He’s shown his $65 million listing at 401 North Tigertail Road in Brentwood eight times since putting it on the market late last month.

Arana’s colleague at The Agency, Paul Lester, offered another view. Lester said he tapped two of his billionaire clients for their thoughts on the tax.

“They feel the time has not come for this and it will not get done this round and this is more political signaling than a real solution,” he said. “Both felt there are ways to ratchet up taxation incrementally above certain thresholds to deal with deficits over time, but not this blanket proposal.”

Billy Rose, a founder and vice chair at The Agency, pointed out the state doesn’t have to look any farther than its own backyard and Hollywood’s troubles as an analogy for what the billionaire tax could bring.

“If our top end activity slows materially, the downstream impact is real,” said Rose, who was previously an entertainment lawyer and talent agent. “Hollywood is getting decimated. The top end is still doing well, but the middle is disappearing in terms of those in the entertainment industry who are working. People don’t have the disposable income and in Los Angeles, capital isn’t an abstract. It builds homes. It funds trades. It supports municipal budgets. We need to really evaluate any policy not just on a moral basis, but an economical one.”