Billionaire Exodus and Legal Threats Loom Over California’s Wealth Tax Vote

Key points

• Don Hankey, chairman of Westlake Financial Services, left California in December 2025 to avoid the proposed tax, citing poor economic treatment despite loving the state’s lifestyle.
• A Stanford study indicates that at least seven billionaires, representing nearly $540 billion in wealth, have severed ties with California to avoid Proposition 40.
• Over 100 economists, including four Nobel laureates and former White House adviser Glenn Hubbard, signed a letter urging voters to reject the tax, citing legal and economic risks.
• The California Business Roundtable, led by Rob Lapsley, is preparing a legal challenge with former Solicitor General Elizabeth Prelogar, focusing on the tax’s retroactive reach and valuation of illiquid assets.
• Proposition 40 faces a tight poll, with 46% support versus 43% opposition, while Google co-founder Sergey Brin’s Propositions 41 and 42 could nullify the wealth tax if they win more votes.
• Supporters, led by SEIU-UHW president Dave Regan, argue the tax is a necessary five-year stopgap to fund healthcare, while Governor Gavin Newsom opposes the measure, advocating for a national wealth tax instead.

Background

Proposition 40, a one-time 5% wealth tax on billionaires, has been a focal point of California politics since its qualification for the ballot. Previous coverage highlighted the massive spending disparity, with opponents raising over $293 million to defeat the measure, compared to roughly $32.4 million for supporters. Governor Gavin Newsom defied his party by endorsing Proposition 42, a measure to ban future wealth taxes, while progressive figures like Bernie Sanders and Ro Khanna campaigned for Proposition 40. Legal experts have debated whether the tax’s legislative amendment clause could allow expansion to all Californians, though courts generally restrict such changes to the original intent.

How outlets are covering it

The California Post emphasizes the immediate impact of the wealth tax on billionaire residency, highlighting Don Hankey’s departure and the Stanford study on capital flight. The New York Times frames the California vote as a potential stepping stone for a national wealth tax, noting that the path to federal adoption may be circuitous. Puck’s coverage is obscured by technical errors, but its title suggests a focus on the paradox of the wealth tax’s intended revenue versus its economic consequences. The California Post and the New York Times both acknowledge the tight polling and the threat of Propositions 41 and 42, while the California Post provides more detail on the legal challenges and the economists’ warnings.

Why it matters

The outcome of Proposition 40 will determine whether California becomes the first state to implement a wealth tax, potentially setting a precedent for federal policy. The measure’s success or failure will also impact the state’s healthcare funding and its reputation as a hub for wealthy individuals and businesses. The legal challenges and potential 'poison pill' measures add layers of complexity, making the vote a critical test for progressive taxation and state autonomy.

What to watch

Voters will decide on Proposition 40, 41, and 42 on November 3. If Proposition 40 passes, opponents are expected to launch legal challenges, potentially involving former Solicitor General Elizabeth Prelogar. The results of Propositions 41 and 42 could nullify key parts of the wealth tax, even if Proposition 40 wins. The outcome will also influence the national conversation on wealth taxes and California’s future economic policies.