As state lawmakers look to high-net-worth individuals as a source of revenue, taxpayers should be aware of how these measures can affect residency planning, trust planning, liquidity, business owner planning and state tax compliance — even before any proposals are enacted. The phrase “wealth tax” is often used broadly, but recent proposals from state lawmakers are not all the same. Some proposals aim to tax accumulated net worth, while others look to tax unrealized gains. And some state proposals are geared more toward traditional income tax surtaxes on high earners. When considering State and Local Tax (SALT), certain distinctions matter.

THREE CATEGORIES TO UNDERSTAND

It is important, for the purposes of SALT, to separate proposed millionaire and billionaire taxes into three categories. First, a true wealth tax generally taxes a person’s net worth or certain assets, whether or not those assets have been sold. 

Second, a mark-to-market tax attempts to tax unrealized appreciation by treating assets as if they were sold at fair market value. 

Third, a millionaire tax is usually an income tax surcharge imposed only after annual income exceeds a threshold, often $1 million. These distinctions matter because the constitutional, administrative and planning issues differ significantly.

THE 2026 BILLIONAIRE TAX ACT

California has received the most attention on this because of its proposed 2026 Billionaire Tax Act. The proposal would impose a one-time tax on California billionaires based on net worth, rather than annual income. The measure has since qualified for the Nov. 3, 2026 statewide ballot as Proposition 40, making California the most immediate example of a state-level proposal to impose a one-time tax on billionaire wealth. The California Secretary of State’s ballot summary states that Proposition 40 would impose a one-time tax of up to 5% on taxpayers and trusts with covered assets valued over $1 billion, including businesses, securities, art, collectibles and intellectual property, while excluding real property and certain pensions and retirement accounts.

PROPOSAL TO TAX RESIDENTS’ NET WORTH

Maryland has also considered a one-time billionaire wealth tax. Maryland House Bill 1238 would establish a one-time tax on resident net worth above $1 billion, along with an ongoing ultra-high net worth surtax. The fiscal note describes a marginal wealth tax rate schedule, with rates reaching 6% for net worth above $5 billion, and a valuation date of Jan. 1, 2027. This proposal is significant because it combines two ideas: a one-time tax on accumulated wealth and a recurring income-based surtax aimed at ultra-high net worth residents.

TAX ON STOCKS, BONDS, OTHER FINANCIAL INTANGIBLE ASSETS

Washington is another important state to watch, although its approach is different from that of California. Washington SB 5797 proposes a tax on stocks, bonds and other financial intangible assets. The engrossed bill described the tax as $5 per $1,000 of true and fair value, effectively 0.5%, with an exemption for up to $50 million of taxable financial intangible assets. Washington also enacted SB 6346, a “millionaires’ tax” on individuals with Washington taxable income, beginning Jan. 1, 2028, at a 9.90% rate. That measure is income based, not a true wealth tax, but it is part of the same broader policy trend of targeting high earners and high-net-worth taxpayers.

HIGH-INCOME SURTAX IN EFFECT

Massachusetts is also worth noting because it already imposes a high-income surtax. Since tax year 2023, Massachusetts’ personal income taxpayers have been subject to an additional 4% surtax on taxable income above the applicable surtax threshold, which was initially $1 million (adjusted annually for inflation). Massachusetts is not an example of a true wealth tax, because it taxes income rather than accumulated net worth, but it is an important example of a state using a millionaire income tax structure to raise revenue from higher-income taxpayers.

WEALTH ASSET TAX PROPOSAL

Hawaii has also considered a wealth-tax-style proposal. Hawaii SB 313 proposed a wealth asset tax on individuals with assets above $20 million in the state. The Senate Judiciary Committee report noted that the proposal would apply to taxable years beginning after Dec. 31, 2029. Although not enacted, Hawaii’s proposal is important, as it shows that wealth-tax discussions are not limited to highly populated areas.

STATE PROPOSALS TO INTRODUCE WEALTH TAXES

Several other states have introduced related proposals. Minnesota HF 4616 proposed an annual 1% wealth tax on taxable wealth over $10 million for individuals and certain trusts. New York has continued to consider a billionaire mark-to-market tax that would tax residents with $1 billion or more in net assets by treating certain appreciation as income. 

Illinois SB 3376 similarly proposed a mark-to-market regime for resident taxpayers with net assets of at least $1 billion. Rhode Island lawmakers announced a “Fair Share” package that included a proposed 1% tax on worldwide financial assets above $25 million, a 3% income surtax on higher taxable income and a separate tax on passive investment income. Maine, meanwhile, enacted a 2% income tax surcharge on income above $1 million for single taxpayers beginning in 2026, which is viewed as a millionaire income tax rather than a wealth tax.

KEY TAKEAWAYS 

The planning takeaway is not that every high-net-worth individual must immediately restructure. Many of these proposals may face political, administrative and constitutional challenges. However, the direction of travel is important. States facing budget pressure are increasingly willing to consider taxes on accumulated wealth, financial assets, unrealized gains and high annual income. Taxpayers with significant founder stock, closely held business interests, private equity or venture holdings, trusts, large liquidity events or multistate residency profiles should monitor these developments closely.

The major practical issues are valuation, liquidity, residency, trust situs and audit administration. Publicly traded securities may be relatively easy to value, but closely held business interests, partnership interests, carried interests, intellectual property, art, crypto and other alternative assets create much harder questions. A taxpayer may have significant paper wealth but insufficient liquidity to pay a large one-time tax. Residency also becomes central because many proposals focus on residents and worldwide wealth or income. Trusts will require special attention, as states may attempt to reach grantor trusts, resident trusts, beneficiary interests or trust held assets depending on how the statute is drafted.

The broader SALT lesson is that “millionaire tax” and “wealth tax” proposals should not be treated as a single category. A true wealth tax, a mark-to-market tax and a high-income surtax may all be marketed as taxes on the wealthy, but each creates different compliance and planning questions. High-net-worth individuals, business owners and family offices should continue to monitor state proposals, model exposure before major liquidity events, and coordinate income tax, estate planning, residency, and trust planning before a valuation or residency date becomes fixed.

Talk to the SALT Practice at GHJ to learn more about how these proposed taxes could impact you and your financial strategy.