Could a Billionaire Tax Lower Your Taxes? Here’s What Experts Say
Billionaire tax proposals make an appealing promise: if the wealthiest Americans pay more, other taxpayers could benefit. Several states have or will soon test this idea, with voters showing interest in new taxes aimed at ultra-high wealth individuals.
But there's a catch. Simply passing such a levy doesn't guarantee personal savings on your tax return. What actually happens to those new revenues — and whether ordinary households gain any advantage — depends entirely on how lawmakers choose to allocate the money.
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A Billionaire Tax Can Take Several Forms
"Billionaire tax" is less of a specific policy and more of an umbrella term. According to S. Brandon Kress, a certified public accountant (CPA) and vice president of exchange services at i1031, LLC, different versions can target net worth, unrealized appreciation, income above a threshold or minimum effective tax calculations.
Annette Nellen, a CPA and tax professor at San Jose State University, thinks of them more as “wealth taxes” that tax either assets or income. Her home state of California is putting a billionaire tax on the 2026 ballot with Proposition 40, which would allow for a one-time 5% tax on individuals with over $1 billion in certain assets.
Recently, Washington state passed an income-based millionaire tax state senate bill of 9.9% on income over $1 million that takes effect in 2028.
It Would Not Automatically Lower Your Tax Bill
Merely enacting a billionaire tax would not directly reduce what an average taxpayer owes. The only way to do that, Nellen said, is “for lawmakers to also reduce a tax rate — such as state income tax or sales tax — or create new deductions or tax credits.”
Take California's Prop 40. The revenue would likely fund health and education programs with no direct household tax reduction built in. Any benefit would be indirect at best.
Additionally, Kress noted that any revenue would have to flow through a legislative budget process, and would likely appear as a program, a credit or a deficit reduction if any change at all.
Joseph M. Favorito, a certified financial planner (CFP) and managing partner at Landmark Wealth Management, LLC, is skeptical that a wealth tax would generate the expected revenue or produce tax relief.
"Even if it where achievable, congress will likely do what they have always done, which is spend the additional revenue rather than provide tax relief to anyone else," he said.
The Hidden Costs of Wealth Taxes
Even if a billionaire tax passes, it could trigger economic ripple effects that hurt ordinary people.
Wealthy individuals could respond by moving assets or relocating businesses. Nellen pointed out that business owners in high-tax states might decide "that any future expansion will occur outside of the state which would harm the state." Fewer jobs and growth mean less opportunity for everyone.
Then there's the asset devaluation risk. Favorito warned that forced liquidations from billionaires could tank stock prices, dragging down retirement accounts and investment portfolios.
"These massive sales would drive down the value of these assets," he said, which could sting anyone holding related stocks.
Beyond that, Kress raised other practical concerns: valuation disputes, liquidity issues and whether projected revenue even materializes once wealthy taxpayers adjust where they hold their money.
What Actually Matters: Reading the Fine Print
Before getting excited or outraged about billionaire tax headlines, focus on what's actually on your ballot. Dig into the specifics: "the enacted language, who administers valuation disputes, how business ownership is treated and what the law actually dedicates the revenue to," Kress advised.
Wealth taxes also face legal hurdles. New taxes can get challenged in court "as arguments might exist on whether the state's constitution or even the US constitution allows for the tax, effective date provisions, and perhaps other issues," Nellen said. A proposal that sounds good on the ballot could get gutted in litigation.
The Bottom Line
A billionaire tax could indirectly benefit ordinary households through better public services or targeted relief programs. But unless the law explicitly dedicates revenue to lowering your taxes or expanding credits you qualify for, don't count on a smaller tax bill.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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