California voters rejected a ballot measure that would have implemented a one-time wealth tax on the state’s billionaires, turning down one of the most aggressive efforts to hike taxes on the ultrawealthy.
Proposition 40, known colloquially as the billionaire tax, was unable to overcome a flood of negative advertising bankrolled by some of the state’s richest residents.
The measure would have levied a 5% tax on the assets of more than 200 billionaires next year. Advocates estimate it would have raised $103 billion, with 90% of it going to fill state healthcare funding holes created by President Donald Trump’s 2025 tax law.
Had it passed, the proposal was expected to face legal challenges from the state’s billionaires, some of whom had already left the state in hopes of establishing residency elsewhere.
Suzanne Jimenez, chief of staff for SEIU-United Healthcare Workers West, the union sponsoring the measure, told HuffPost ahead of Election Day that the tax was meant to offset billions of dollars in cuts to the state’s Medicaid program.
“We had to figure out: How do you get to $100 billion? And it was taxing all billionaires,” Jimenez said. “It was just arithmetic.”
The proposal drew fierce pushback from California’s richest tech titans, including Google co-founder Sergey Brin. Opponents spearheaded two rival ballot initiatives designed to cancel out Prop 40.
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One of the biggest debates around Prop 40 was whether it would push California’s wealthiest residents to flee the state. Several billionaires, including Brin, moved out of California after the ballot measure was announced in hopes of avoiding a big one-time tax hit.
But the measure was written to apply retroactively to those who were California residents as of Jan. 1, 2026, in order to prevent the wealthy from dodging the measure. That provision was expected to be subject to legal challenges.
Critics of the proposal, including Democratic Gov. Gavin Newsom, had argued that it would ultimately hurt the state’s tax base. Even if billionaires had been proven residents under the law, they would have ultimately left the state and stopped paying annual income tax, opponents claimed.
But backers of the measure said such fears were overblown, noting that many billionaires showed no signs of leaving the state during the campaign.
Although the rich pay income tax like everybody else, much of their wealth is tied up in unrealized capital gains that can’t be taxed until stock is sold. They also have an army of accountants who can help lower their tax bills.
According to a paper published last year, the richest Americans paid an effective tax rate of just 24% between 2018 and 2020, compared to the 30% rate paid by everybody else.
Emmanuel Saez, a University of California, Berkeley, economist who co-authored that paper and helped draft Prop 40, recently told HuffPost that passing the measure would mark “a historical turnaround showing that democracy can finally fight back against the growing wealth and power of billionaires.”
He also predicted that, if it passed, it would spur progressives elsewhere to develop similar tax plans to deal with funding cuts.
“It would encourage other states to follow suit with their own ultrarich wealth taxes and make the debate on billionaires’ taxation at the federal level front and center in the Democratic presidential primary,” he said.