The Ironic Battlefield:

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Billionaire Wealth Taxes, the DExit, and Delaware's Peculiar Advantage

The Wealth Tax Movement — What's Actually Happening

California's "2026 Billionaire Tax Act" would impose a one-time tax equal to 5% of the net worth of individuals with a net worth of $1 billion or more who are California residents as of January 1, 2026. The tax would be due in 2027, with the option to spread payments over five years. Real estate, pensions, and retirement accounts would be excluded. Ninety percent of revenues would be reserved for healthcare services. The initiative is sponsored by SEIU-United Healthcare Workers West and targets approximately 200 people who hold a combined wealth of $2 trillion.

California is not alone. States introducing bills to tax the rich include California, Connecticut, Hawaii, Illinois, Maryland, Minnesota, New York, and Washington, each with its own approach, typically including taxing assets alongside lowering estate tax thresholds. Minnesota has already enacted a 1% wealth proceeds tax. Washington passed a capital gains excise tax. Washington Governor Bob Ferguson has publicly endorsed a proposal to impose a 9.9% tax on annual adjusted incomes above $1 million — a significant shift for a state that has historically avoided personal income taxes altogether.

The California proposal has a deliberately designed trap: it would apply to those who are California residents as of January 1, 2026, leaving billionaires little time to establish tax residency elsewhere. Attorneys say the aggressive timeline will likely invite legal challenges. Several billionaires — including Meta's Mark Zuckerberg, Google co-founders Larry Page and Sergey Brin, and Oracle's Larry Ellison — have signaled possible departures. Notably, Nvidia CEO Jensen Huang told Bloomberg he wasn't concerned and would pay whatever California asked.

Even California's own governor opposes it. Governor Gavin Newsom has come out against the 2026 Billionaire Tax Act, aware that the proposal could lead to an exodus of the California tax base.

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Delaware's Position — The Delicious Irony

Here is where it gets strategically interesting for Delaware, and where the irony is almost painful in its precision.

Delaware's entire value proposition to corporations has always been not taxing them into flight. Delaware does not impose income tax on corporations registered in the state that don't conduct business there. Delaware trusts are taxed favorably for non-resident as well as resident beneficiaries; residents of higher-taxed states, like California or New Jersey, could use Delaware trusts to become completely exempt from state income tax. Delaware is, by most independent assessments, an onshore tax haven — the ITEP has called it exactly that, noting that a loophole in Delaware's tax code is responsible for the loss of billions of dollars in revenue in other U.S. states, and its lack of incorporation transparency makes it a magnet for people looking to create anonymous shell companies.

So the question you're asking — what is Delaware doing in response to the wealth tax movement — has a two-part answer that cuts in opposite directions simultaneously.

On the corporate side: Delaware is actively competing to keep corporations by being the anti-California. SB 21 signaled that Delaware will reshape its laws to protect controlling stockholders and founders from aggressive litigation — precisely the class of people California is now trying to tax. Governor Meyer has proposed increasing business formation fees by roughly $81 million in the FY 2027 budget, but this is a fee adjustment, not a tax on wealth or income, and is designed to exploit the DExit interest by making Delaware more attractive to incoming incorporations, not less.

On Meyer's own fiscal politics: The governor is simultaneously playing a careful game on personal income tax that reveals the contradictions in Delaware's position. Meyer's budget proposes that 92% of Delawareans receive a personal income tax cut, while the most fortunate pay their fair share — including new tax brackets for income above $125,000, $250,000, and $500,000. However, Meyer's FY 2027 budget dropped the signature personal income tax bracket reform, which he had struggled to pass through the legislature, particularly facing resistance from House Speaker Melissa "Mimi" Brown. And Meyer called an extraordinary session in late 2025 to address a projected $400 million revenue shortfall over three years, which he attributed to federal tax cuts for the wealthy trickling down through Delaware's mirrored tax code.

The strategic opportunity Delaware is actually sitting on: As California threatens its approximately 200 billionaires with a $100 billion collective tax bill, and as other high-tax states pile on, Delaware is quietly positioned as the most attractive personal domicile in the Mid-Atlantic — no sales tax, relatively low income tax rates, no wealth tax of any kind proposed, strong privacy protections for business ownership, perpetual dynasty trusts, and anonymous LLCs. The same trust infrastructure that has made Delaware a corporate haven for a century is equally effective for personal wealth preservation.

The deep irony is this: Delaware passed SB 21 to keep corporate entities from fleeing to Texas and Nevada. California's wealth tax may now be doing Delaware a different favor — sending wealthy individuals and their family offices east to Wilmington, rather than west to Miami. The state that spent 2024 and 2025 worried about corporations leaving may find that 2026 brings an unexpected influx of ultra-high-net-worth individuals doing exactly what California's billionaires are considering: changing their legal address to somewhere that won't take 5% of everything they own.

Delaware has not made any formal move to market itself as a personal tax refuge in response to the California initiative — that would be politically awkward given Meyer's "fair share" rhetoric. But the structural reality is that its legal architecture already does exactly that. The du Pont family understood this well. So did the credit card banks in 1981. The question is whether the post-Biden political class running Delaware today is sophisticated enough to see the opportunity without having to say out loud what they're doing.

 

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Key Sources:

• California 2026 Billionaire Tax Act full text: https://oag.ca.gov/system/files/initiatives/pdfs/25-0024A1%20(Billionaire%20Tax%20).pdf
• CA LAO analysis: https://lao.ca.gov/BallotAnalysis/Initiative/2025-024
• Baker Botts legal analysis of constitutional challenges: https://www.bakerbotts.com/thought-leadership/publications/2025/december/california-2026-billionaire-tax-act
• Berkeley expert report (Saez, Galle, et al.): https://eml.berkeley.edu/~saez/galle-gamage-saez-shanskeCAbillionairetaxDec25.pdf
• CNBC on billionaires' legal options: https://www.cnbc.com/2026/01/08/california-wealth-tax-proposal-leaves-billionaires-with-little-way-out.html
• ITEP State Tax Watch 2026 (Delaware section): https://itep.org/state-tax-watch/
• Delaware Governor Meyer FY2027 budget: https://news.delaware.gov/2026/01/29/governor-matt-meyer-unveils-fy27-recommended-budget-focused-on-delaware-first-affordability-and-responsible-growth/
• Delaware extraordinary session on budget shortfall: https://news.delaware.gov/2025/10/31/governor-matt-meyer-calls-extraordinary-session-to-address-budget-shortfall/
• ITEP on Delaware as onshore tax haven: https://itep.org/delaware-an-onshore-tax-haven/
• HBK Wealth on Delaware trust law advantages: https://hbkswealth.com/insights/tax-havens-trust-laws-the-times-may-be-a-changin-2/