California Billionaires Spend $293M to Block Prop 40, Spending 0.07% of Their Billions

Key points

• Proposition 40 proposes a one-time 5% tax on the net worth of California residents with over $1 billion in assets, payable over five years.
• Economists estimate the tax would raise $107 billion, with the four wealthiest Californians owing 40% of that total.
• Only 30 of the 260 eligible billionaires have contributed to opposition campaigns, totaling $293 million, which is 0.07% of their estimated tax bill.
• Sergey Brin has donated $102 million against the measure, while Mark Zuckerberg restructured Meta’s stock to maintain control while paying the tax.
• Polls show a narrow 'Yes' lead, but prediction markets favor 'No' due to concerns about billionaires relocating out of state.

Background

Proposition 40 emerged in response to federal funding cuts for healthcare and education, aiming to offset losses from the One Big Beautiful Bill Act. The measure has divided California’s political landscape, with labor unions supporting it and Governor Gavin Newsom opposing it. Earlier debates focused on whether the tax could be expanded beyond billionaires, but legal experts generally view it as limited to the ultra-wealthy. The tax is designed to address the gap between billionaires’ taxable income and their total wealth, which often remains untaxed until assets are sold.

How outlets are covering it

The Los Angeles Times highlights the disparity between the $293 million spent by billionaires to oppose the tax and the $107 billion they would owe, emphasizing that only 1 in 8 eligible billionaires contributed to opposition efforts. The New York Times focuses on the internal conflict within the Service Employees International Union, where union leader Dave Regan faces allegations of intimidation and assault related to his push for the tax. CNBC and Yahoo Finance present a balanced view, noting that while polls show a 'Yes' lead, prediction markets favor 'No' due to concerns about wealth mobility. The Hoover Institution estimates the tax would raise only $40 billion and cause long-term economic harm, while proponents argue it is a necessary response to federal cuts. Legal experts like Darien Shanske argue that residency laws will prevent most billionaires from avoiding the tax, while critics like Gavin Newsom warn that the measure could drive wealth out of the state.

Why it matters

Proposition 40 is a landmark test of state-level wealth taxation in the United States. Its outcome will influence how other states approach taxing extreme wealth and could set a precedent for federal wealth tax proposals. The measure’s success or failure will also impact California’s healthcare and education funding, which are facing significant cuts due to federal legislation. Additionally, the debate highlights the tension between progressive policies and concerns about economic mobility and tax avoidance.

What to watch

Voters will decide on Proposition 40 on November 3. If passed, the tax will be collected over five years, with the first payment due in 2027. Competing measures, Propositions 41 and 42, could nullify the tax if they receive more 'Yes' votes. The Franchise Tax Board will assess residency and calculate the tax based on publicly available stock information and private asset valuations. Legal challenges may follow, particularly regarding the valuation of private companies and the definition of residency.