California Republican gubernatorial candidate Steve Hilton is warning that a proposed billionaire tax would further strain the state's economy, arguing that California is already hemorrhaging businesses, investment, and tax revenue as residents contend with elevated living costs.

Hilton joined FOX Business' Maria Bartiromo on "Mornings with Maria" to discuss the proposal, which critics say could accelerate the exodus of wealthy residents and employers if enacted. The California Democratic Party has endorsed the controversial billionaire wealth tax measure, which is slated to appear on the state's 2026 ballot. California already levies the highest top marginal income tax rate among U.S. states, and its budget is unusually dependent on capital gains and income taxes paid by a relatively small share of high earners—a structure that has contributed to sharp swings in state revenue when financial markets soften.

"It's already cost California billions of dollars in lost tax revenue because of the amount of wealth that's already left the state," Hilton said. "Just because of the threat of this insane tax."

Lawmakers supporting the proposal argue that the state's wealthiest residents should contribute more, while opponents contend California's existing tax burden is already pushing individuals and companies to relocate. Hilton noted that the state's top earners already account for a substantial share of California's income tax collections and questioned whether higher taxes would translate into improved public services.

Beyond the billionaire tax debate, Hilton pointed to rising labor costs, energy prices, and regulatory burdens as factors making California less competitive. He argued that repeated minimum wage increases create "a kind of doom loop" by driving up business costs that are ultimately passed on to consumers.

The warnings come as California has lost its Fortune 500 crown to Texas, which has no state-level personal income tax—a contrast repeatedly highlighted by officials promoting business relocation. In recent years, several major companies, including Tesla, Oracle, and Hewlett Packard Enterprise, have moved their corporate headquarters from California to Texas.

Hilton also cautioned that businesses are scaling back hiring, turning to automation, or departing the state entirely as operating costs climb. "If we don't face up to the reality, California's economy is going to absolutely collapse," he said.

As an alternative, Hilton said he would pursue lower taxes, reduced government spending, and fewer regulations, arguing such policies would attract employers, expand investment, and make California more affordable for residents. The 2026 ballot measure's outcome could shape not only the state's revenue structure but also the competitive dynamics between California and other states actively courting relocating businesses and high-income filers.