Russell Peters and California's Tax Residency Test: Can Billionaires Really Escape the 5% Wealth Levy?

California’s proposed billionaire tax has set off a gold rush—but not the kind that built the Golden State. Instead, wealthy residents are literally racing against the clock, exploring whether they can relocate before a historic November 2026 vote. But there’s a catch: asking whether billionaires can outrun California’s tax authorities is like asking if Russell Peters successfully left California. Spoiler alert: he didn’t—and neither may they.

The proposal imposes a one-time 5% levy on net assets exceeding $1 billion, with the state forecasting roughly $100 billion in revenue from over 200 of California’s ultra-wealthy. But the real story isn’t about the tax itself—it’s about the legal minefield awaiting anyone who tries to dodge it.

The $100 Billion Gamble: What the 2026 Billionaire Tax Actually Targets

California’s 2026 Billionaire Tax Act would sweep across a remarkably broad asset base: publicly traded stocks, private equity holdings, personal assets over $5 million, and retirement accounts exceeding $10 million. The architects deliberately excluded one category—directly held real estate through revocable trusts—largely to sidestep conflicts with California’s 1978 Proposition 13, which capped property tax rates at 1%.

Proponents, including the Service Employees International Union–United Healthcare Workers Western Division (SEIU-UHW), estimate the tax would collect approximately $100 billion from 200-plus billionaires, based on Forbes net worth valuations. That revenue would flow into state coffers between 2027 and 2031, primarily plugging federal Medicaid funding gaps. The four academic architects—three law professors and UC Berkeley economist Emmanuel Seth—project the tax will directly address a fundamental inequity: while billionaires compose just 0.01% of California’s population, they currently pay only about 2.5% of the state’s total personal income tax revenue.

The income tax disparity stems from how ultra-wealthy individuals structure their finances. Unlike high-earning executives, doctors, or lawyers (who comprise the wealthiest 2% of earners), billionaires can maintain lavish lifestyles without triggering capital gains taxes—by pledging stocks as collateral for loans instead of selling them.

Why Russell Peters Matters: The Tax Residency Precedent That Changes Everything

Here’s where Russell Peters enters the California taxscape. The Canadian comedian and actor thought he had successfully exited California’s tax jurisdiction. He purchased properties in Nevada—a state infamous for having no state income tax—established three businesses there, and declared himself a non-resident for California tax purposes, even listing a Canadian address on official documentation.

It didn’t matter.

In September 2024, California’s Office of Tax Appeals ruled that Peters owed back taxes for 2012-2014 and remained a California tax resident throughout that period. The court’s rationale cut through the legal fiction: Peters owned property in California, his daughter (from a previous relationship) resided in California, and his credit card statements proved he spent more days in California than anywhere else. The court applied a sweeping “multi-factor test,” weighing tax residency registration, personal and professional affiliations, actual time spent in the state, and real property ownership.

Peters’ failed escape illustrates a brutal truth: California doesn’t simply accept a billionaire’s announced relocation. Tax authorities have woven an almost inescapable web, and judges are empowered to see through paper residency.

The Legal Playbook: What Billionaires Think They Can Do

Some high-net-worth individuals are consulting with tax attorneys about the proposal’s eight potential constitutional vulnerabilities. Jon D. Feldhammer, head of the San Francisco office of Baker Botts LLP, published an analysis outlining how the bill might collide with federal and state constitutional protections.

One promising angle: retroactivity. If voters pass the tax in November, it applies retroactively to anyone who was a California tax resident on January 1, 2026. Feldhammer’s strategic advice to billionaires is bracing: relocate before the November vote. The earlier the exit, the stronger the legal position.

This logic explains why Larry Page, Google’s co-founder and Alphabet’s largest individual shareholder, purchased two Miami properties for $173.5 million in December 2025—right before the January 1, 2026 residency cutoff. His affiliated companies began relocating out of California around the same time.

But timing alone won’t suffice.

The Russell Peters Problem: Why Relocation Is Harder Than It Looks

California’s track record on residency disputes cuts against would-be escapees. Beyond Peters, consider the Bracamonte case (2021), in which a couple attempted to flee to Nevada after selling a business valued at over $17 million. They lost. The court rejected their residency claims despite their Nevada property, businesses, and tax filings.

Shail P. Shah, a San Francisco tax attorney specializing in residency disputes, explains the legal standard: “The determination of California tax residency is entirely subjective,” he noted in an article titled “Social Distancing From California” written after the Bracamonte ruling. Judges must weigh whether a California taxpayer truly intends to permanently sever all ties and leave the state.

For tech billionaires who’ve spent decades in Silicon Valley accumulating wealth there, that’s an extraordinarily high bar. As Shah frames it: “If you’re a billionaire, have a huge social network in California, play at Pebble Beach Golf Links regularly, and grew up in Palo Alto, it’s hard to argue you don’t intend to return.”

The Russell Peters precedent reinforces this framework. His case demonstrates that wealth, sophistication, and careful planning—diversified properties, multi-state business registration, even a foreign address—don’t guarantee a successful exit.

Enforcement Nightmares: How California Plans to Stop You

The proposal’s drafters anticipated escape attempts and built formidable preventative machinery. For unlisted company equity, the default valuation formula is “book value plus annual book profit multiplied by 7.5 times,” with minimum valuations pegged to previous financing rounds. Owners who believe valuations are inflated can submit appraisals for review, but the burden of proof sits with the taxpayer.

For personal assets like art and jewelry, valuations can’t drop below insured amounts. Charitable donations are deductible—but only if legally binding donation agreements are finalized by October 15, 2025. Real estate purchased in 2026 won’t qualify for exemptions if deemed acquired for tax avoidance purposes.

These clauses explicitly target the mechanisms billionaires historically use to dodge wealth taxes: asset undervaluation, rapid relocation, and charitable “reallocation” of funds.

The Broader Battlefield: California Isn’t Alone

California’s assault on billionaire finances arrives amid a nationwide “tax the rich” momentum. New York City, already boasting the nation’s highest combined state-and-city income tax rate (with state tax at 10.9% and city taxes up to 3.9%), just elected Mayor Zohran Mamdani, who campaigned on raising the city’s top rate to 5.9%—bringing the combined rate to 16.8%. Mamdani won despite heavy billionaire spending against his campaign, signaling that voters increasingly support redistribution measures.

The Russell Peters Question: Can You Actually Leave?

The proposal still faces hurdles. It must collect 875,000 valid voter signatures by end of June 2026, pass constitutional review, and survive litigation. The California Legislative Analyst’s Office warns the tax could cost California hundreds of millions—or more—in personal income tax revenue annually, because if billionaires and their companies truly relocate, the state loses not just their taxes but employee income taxes and corporate taxes.

Yet the Russell Peters saga provides a cautionary tale. Despite sophisticated relocation planning, California’s courts applied a common-sense residency standard and ruled against him. For a billionaire contemplating escape, the question isn’t whether the plan looks airtight on paper—it’s whether a judge will accept it in open court. History suggests the answer is likely no.