A California wealth tax proposal is causing an open rift between Democrats, with billionaires already moving money and residency out of state.

• A ballot measure called Prop 40 would put a 5% tax on billionaires' wealth, which critics say really works out closer to 8-10% because it would hit unrealized gains, not just cash income.
• A rival measure, Prop 42, would ban new taxes like this, and that split is turning into a public fight between a California lawmaker pushing Prop 40 and the state's governor backing Prop 42.
• The governor is getting blamed for the backlash because wealthy residents, including tech executives and people tied to Oracle, have already moved assets or moved entirely to places like Texas and Florida to avoid the tax.
• One Democratic strategist suggested the fix would be getting other countries to cooperate so billionaires can't dodge the tax by leaving the country, which would turn a state-level wealth tax into a national or even global one.
• Backers claim a 5% wealth tax on billionaires nationwide could raise trillions of dollars, meaning this fight is likely to become a bigger campaign issue in the next presidential race.

Outlook: Expect the wealth tax debate to escalate into a national political issue by the 2028 election, with Democrats divided over whether to pursue it.