Rising wealth concentration among ultra-rich highlights risks for US economy, report says

California’s proposal to impose a one-off wealth tax on its richest residents is facing significant hurdles, and experts say its design has notable flaws. According to the Wall Street Journal, while the tax aims to raise revenue from the state’s wealthiest, it highlights broader economic risks linked to concentrated wealth.

The WSJ reports that the US economy is increasingly dependent on a small group of ultra-wealthy households. Their spending is largely tied to stock market performance, which raises concerns that a major market correction could have far-reaching effects on the wider economy.

California’s billionaire wealth tax: What’s being proposed

California is considering a one‑time 5% wealth tax on residents with net worth above $1 billion to help fill budget gaps, especially in healthcare funding after federal Medicaid cuts. Unions backing the measure say it could raise around $100 billion if it makes the ballot and is approved by voters.

The tax would apply to anyone who was a California resident on January 1, 2026, even if the measure passes later.

Supporters argue the ultrawealthy should help support systems that helped make their wealth possible.

However, the news outlet notes the plan is a “long shot” and has several design and legal problems that make passage and implementation uncertain.

Design problems

One key concern identified by the news outlet is how the tax would be calculated. Under the current draft:

Wealth would be measured using the higher of a billionaire’s voting interest or economic interest in a company — a rule that could unfairly hit tech founders who hold large voting shares relative to their actual economic stakes.

This could lead to outsized tax bills and even force founders to sell company stock to pay the tax, potentially harming local economies.

Will billionaires leave? A real possibility

Another concern is that billionaires might move out of California rather than face the tax. There are already signs this is happening:

Opponents warn that if billionaires leave, California could lose future income and corporate tax revenue along with jobs and investment.

The Wall Street Journal reports that this fear has helped fuel opposition to the proposal among wealthier residents and business groups.

Why the wealth tax debate matters

California’s ballot measure comes amid growing discussion about wealth inequality in the US the Journal highlights data showing how much wealth the richest households now hold:

The richest 1% of households controlled about 32% of US wealth in late 2025 — a record high.

A much smaller group — the top 0.1% — held roughly 14.4% of national wealth.

At the same time, the bottom half of US households owns a much smaller share of wealth, around 2.5%.

These figures help explain why policymakers and activists are increasingly debating whether current tax rules allow billionaires to pay less relative to their wealth than wage‑earning Americans.