California is one step closer to America’s first billionaire wealth tax — and the divide between red and blue state taxes is getting deeper

california's proposed billionaire wealth tax cleared another legislative hurdle this week, pushing the state closer to becoming the first in the u.s. to tax unrealized capital gains. the bill would levy an annual 1% tax on net worth above $1 billion, with revenue earmarked for housing and wildfire prevention. the move widens the gap between red and blue state tax policies. last year's federal tax overhaul capped state and local tax deductions at $10,000, which hit high-tax states like california hard. since then, states have taken divergent paths — some cutting rates, others like california and new york exploring new wealth taxes to offset federal changes. the california bill still needs a full assembly vote and governor newsom's signature. if passed, it would apply to roughly 20 of the state's wealthiest residents and generate an estimated $5 billion annually.