California’s Billionaire Tax Faces Existential Threat from Billionaire-Backed Countermeasures

Key points

• Proposition 40 would impose a one-time 5% tax on the net worth of California’s roughly 250 billionaires, potentially raising tens of billions of dollars to fund healthcare and education.
• Propositions 41 and 42, funded by 'Building a Better California' with over $252 million, aim to block or nullify Proposition 40 by imposing spending caps and prohibiting special taxes on assets.
• Supporters, including SEIU-UHW (which spent $31 million) and Senator Bernie Sanders, argue the tax is necessary to address federal cuts to Medicaid and SNAP, which could disenroll 1.3 million Californians.
• Opponents, including Governor Gavin Newsom and tech billionaires like Sergey Brin ($102 million) and John Doerr ($30 million), argue the tax will cause wealthy residents to leave the state, reducing overall tax revenue.
• Legal experts debate whether Proposition 40’s language allows the legislature to expand the tax beyond billionaires, with some arguing it is a 'slippery slope' and others noting constitutional restrictions.

Background

California has long been a high-tax state, with Proposition 30 in 2012 temporarily increasing sales tax and adding high-income brackets, which raised $120 billion for local schools. The current debate follows the federal 'One Big Beautiful Bill Act' (HR 1), which cut $1.2 trillion from Medicaid and SNAP, creating a fiscal crisis in California. Previous attempts to pass wealth taxes in the legislature have stalled, making Proposition 40 the first direct voter decision on such a measure. The state’s deep inequality, with the poorest 20th percentile having a net worth of $13,000 per household, has fueled support for the tax, while concerns about capital flight and economic impact have driven opposition.

How outlets are covering it

LA Public Press emphasizes the strategic threat posed by Propositions 41 and 42, noting that even if Proposition 40 passes, these measures could kill it. They highlight the massive spending by 'Building a Better California' ($217 million across the three propositions) and the potential for a 'Trojan horse' argument, where the tax could be expanded. LAist focuses on the legal ambiguity of Proposition 40’s legislative amendment clause, with experts like Michael Colantuono and Megan Jones debating whether the tax can be expanded beyond billionaires. ABC News highlights the political battle between progressive Democrats (Sanders, Khanna) and Governor Newsom, who opposes the state tax in favor of a national one. ABC also notes the 'slippery slope' concerns from groups like the California Farm Bureau and the potential for capital flight, citing tax lawyer David Lesperance. All sources agree on the high stakes and the massive spending, but differ on the likelihood of the tax passing and its long-term impact.

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 other states and influencing national policy. The tax could raise tens of billions of dollars to address critical gaps in healthcare and education caused by federal cuts, but it also risks driving away wealthy residents and reducing overall tax revenue. The debate highlights the tension between progressive and conservative views on wealth taxation and the role of ballot initiatives in shaping state policy. The massive spending on both sides underscores the high stakes and the potential for a shift in the political landscape, particularly as the 2028 presidential election approaches.

What to watch

Voters will decide on Propositions 40, 41, and 42 in November 2026. If Proposition 40 passes but either 41 or 42 receives more votes, the tax will not take effect. Supporters are expected to continue campaigning, with SEIU-UHW and other labor groups pushing for a 'yes' vote. Opponents, including 'Building a Better California' and Governor Newsom, will likely intensify their efforts to block the tax. Legal experts may be called upon to interpret the legislative amendment clause if the tax passes and the legislature attempts to expand it. The outcome will also influence the 2028 presidential election, with candidates like Ro Khanna and Gavin Newsom weighing the issue in their campaigns.