California Rejects Proposition 40 on Billionaire Tax

California voters have turned down Proposition 40, which aimed to tax billionaires on their net worth. The Associated Press announced the results six days after Election Day. This decision marked the end of a contentious debate among high-profile Democrats. California Governor Gavin Newsom opposed the measure, arguing it might drive wealthy residents out of the state. Conversely, Senator Bernie Sanders and Representative Ro Khanna supported it.

The initial count by the Secretary of State’s office at 5:14 p.m. on Monday showed 5,789,026 votes (52.9 percent) against the proposition and 5,159,356 votes (47.1 percent) in favor.

Behind the Opposition

Opponents of the proposition raised significantly more funds than supporters. “Building a Better California,” the committee leading the opposition, amassed over $333 million. Google co-founder Sergey Brin alone contributed over $100 million.

Details of Proposition 40

The proposed tax would have imposed a one-time 5 percent levy on billionaires residing in California as of January 1, 2026. The payment was due in 2027, with 90 percent of the revenues allocated to healthcare and the remainder to education and food assistance. “SEIU-United Healthcare Workers West,” the sponsoring union, projected revenue of about $100 billion. In contrast, the Legislative Analyst’s Office estimated “tens of billions of dollars” spread over several years, plus a potential long-term decrease in state income tax revenue.

Economists presented conflicting views. The Hoover Institution projected the tax might generate roughly $30 billion, partly because a significant portion of the tax base had already left California. It also estimated a net negative impact of $38.9 billion on state finances due to lost income tax. The drafters cited a National Bureau of Economic Research paper claiming potential revenues of $100 billion, with billionaires currently contributing around 0.2 percent of their wealth as state income tax.

Countermeasures and Departures

“Building a Better California” also supported Propositions 41 and 42, written to counter the wealth tax. Analysts warned that if either received more “yes” votes than Proposition 40, courts might block the tax. While these measures weren’t needed to stop Proposition 40, Proposition 42 may have lasting effects. As of Monday, it was leading with 51.7 percent of votes.

Several billionaires targeted by the tax had already left or were in the process of leaving California. Brin and Larry Page had moved before the residency cutoff. In contrast, Meta CEO Mark Zuckerberg agreed to stay in the state for eight years, committing to cover his tax obligations without losing company control.

Democratic Division

Bernie Sanders endorsed the tax, expressing concern over wealth concentration. Ro Khanna called Proposition 40 “the most significant ballot initiative in America.” Governor Newsom suggested a federal minimum tax for the wealthy and recognized inequality as an issue, but disagreed with the proposed state approach.

Future Implications

If Proposition 42 is successful, any new wealth tax would necessitate a voter-approved constitutional amendment. Labor leaders view the campaign as an initial move to influence taxation at a broader level. The vote count continues, and results are not yet final.