California voters decisively rejected Proposition 40, a proposed one-time 5% wealth tax on billionaires, with final results showing 55.6% opposed and 44.4% in favor. The measure would have applied to an estimated 200 to 260 residents with net worths exceeding $1 billion as of January 1, 2026, with proceeds earmarked for healthcare, food assistance, and education. The vote followed a $163 million campaign battle, including $130 million spent by opponents and $33 million by supporters.
Opposition led by tech billionaires and unions
The campaign against Proposition 40 was spearheaded by a coalition including Google co-founder Sergey Brin, who contributed $102 million to the opposition effort through the group Building a Better California. The coalition argued the tax could destabilize public services and the state’s economy. Supporters, led by the Service Employees International Union-United Healthcare Workers West (SEIU-UHW), framed the measure as a necessary step to fund healthcare amid concerns over reduced federal funding. The union has vowed to resurrect the proposal in 2028.
Key details of Proposition 40
The tax would have been a one-time levy targeting California residents and trusts with assets over $1 billion. Certain assets, including real property and retirement accounts, were excluded from the calculation. Proponents estimated the tax could raise $100 billion over five years, though critics warned it might incentivize wealthy individuals to leave the state, reducing the tax base. California Gov. Gavin Newsom, a Democrat, opposed the measure, citing a legislative analysis that projected minimal long-term revenue gains and potential economic harm.
Political divisions and broader implications
The proposition exposed divisions within the Democratic Party. While U.S. Sen. Bernie Sanders (I-Vt.), the California Democratic Party, and Hollywood figures like Mark Ruffalo backed the tax, Newsom and the California Teachers Association opposed it. The measure’s failure occurred amid a nationwide midterm election blue wave, underscoring the challenges of advancing progressive tax policies even in deep-blue states. Other states, including Illinois, Maryland, Minnesota, Rhode Island, and Washington, have explored similar wealth tax proposals, which could gain momentum following the midterms.
Economic and legal uncertainties
Critics, including Newsom, argued the tax could lead to capital flight and legal challenges, citing precedents where high-net-worth individuals relocated to avoid similar levies. Supporters countered that the tax targeted a small group of ultra-wealthy residents who could afford to contribute more to public services. The measure’s defeat leaves California’s fiscal approach to wealth inequality unresolved, with advocates vowing to pursue alternative strategies in future elections.