California billionaire tax fails as union backers concede defeat

Key points

• Proposition 40 trails by more than 8 percentage points statewide, with over 4 million votes still to be counted, including more than 500,000 in Los Angeles County.
• The measure has found support in nine counties: Alameda, Humboldt, Los Angeles, Mendocino, Monterey, San Francisco, Santa Cruz, Sonoma, and Yolo.
• Propositions 41 and 42, which limit new state taxes and ban taxation of personal assets, are both leading by more than 6 and 7 percentage points respectively, posing a legal threat to Prop 40 even if it passes.
• The Service Employees International Union-United Healthcare Workers West, which raised nearly $35 million for the campaign, all but conceded defeat on Tuesday night, stating they will try again in 2028 unless the legislature acts.
• Opponents of the billionaire tax raised over $300 million, primarily from billionaires subject to the tax, creating a spending disparity of nearly 10 to 1 against the proponents.

Background

The debate over Proposition 40 began in early 2026, with Governor Gavin Newsom opposing the measure and endorsing Proposition 42 to block it, defying his own party. Proponents, including Sen. Bernie Sanders and Rep. Ro Khanna, argued the tax was necessary to offset federal healthcare cuts and address inequality. Legal experts debated whether the measure’s legislative amendment clause could allow expansion beyond billionaires, while opponents warned of capital flight. Early polling showed the measure leading but lacking majority support, with opposition spending exceeding $100 million by October.

How outlets are covering it

The Los Angeles Times emphasizes the statistical likelihood of defeat, highlighting the vote count and the threat from Propositions 41 and 42. CNBC frames the failure as a catalyst for federal tax hikes, noting that Democrats in Congress may now pursue federal wealth taxes and surcharges on high earners, citing proposals from Senators Chris Van Hollen and Cory Booker. Politico focuses on the internal divisions within the Democratic coalition, arguing that the campaign’s failure was due to a lack of broad consensus among labor unions and a failure to build a unified coalition, despite the measure’s popularity in deep-blue areas. All three sources agree on the likely defeat but differ on the implications: LA Times focuses on the immediate electoral outcome, CNBC on the federal policy shift, and Politico on the political miscalculation by progressive leaders.

Why it matters

The likely defeat of Proposition 40 signals a significant setback for progressive wealth tax initiatives in the United States, particularly in deep-blue states. It highlights the challenges of passing such measures despite strong public support for taxing the wealthy, as massive opposition spending and internal political divisions can derail ballot initiatives. The outcome may influence federal tax policy, as Democrats in Congress consider alternative approaches to raising revenue from high earners, potentially leading to new federal wealth taxes or surcharges. Additionally, the failure underscores the power of billionaire interests in shaping state and national tax policy, even in states with strong progressive leanings.

What to watch

The final vote count for Proposition 40 is expected to be completed in the coming days, with the Associated Press calculating the expected outcome based on remaining returns. If Proposition 40 passes but Propositions 41 or 42 receive more 'yes' votes, the billionaire tax will be nullified. The Service Employees International Union-United Healthcare Workers West has indicated it will attempt to pass a similar measure in 2028 unless the California legislature takes action to tax billionaires. In Washington, D.C., Democrats are expected to introduce new tax proposals aimed at high earners, including potential federal wealth taxes and surcharges, in the coming months, despite the likelihood of a presidential veto.