California's Proposition 40: A $100 Billion Wealth Tax Faces a $340 Million Billionaire Defense

Key points

• Proposition 40 proposes a one-time 5% tax on the total net worth of California's billionaires, targeting roughly 250 individuals.
• The initiative aims to generate $100 billion over five years, with 90% earmarked for healthcare to counter federal cuts from the 'One Big Beautiful Bill.'
• Opposition has raised over $340 million, with Google co-founder Sergey Brin contributing more than $100 million to defeat the measure.
• Several billionaires, including Peter Thiel and Larry Page, have left California since the proposal was introduced.
• The measure faces competition from Propositions 41 and 42, which could nullify the wealth tax if they receive more votes than Proposition 40.

Background

Recent coverage indicates that Proposition 40 has faced polling slumps, with support dropping to the mid-40s as independents oppose the measure. Governor Gavin Newsom has endorsed Proposition 42, a ban on future wealth taxes, aligning with tech donors against his own party. Additionally, California's Franchise Tax Board is preparing for unprecedented residency audits to enforce the tax if approved, facing challenges in valuing global assets and determining residency for relocating individuals.

How outlets are covering it

Supporters, including SEIU United Healthcare Workers West leader Dave Regan and economists Gabriel Zucman and Emmanuel Saez, argue the tax is a necessary emergency response to federal healthcare cuts. They view it as a temporary fix that highlights a broken tax system. Opponents, including tech billionaires and Governor Gavin Newsom, argue the tax will cause a permanent loss of tax base as wealthy residents leave the state. Former Congresswoman Katie Porter, a progressive, also opposes the measure, stating it fails to correctly tax the ultra-wealthy and harms job creation. The New York Times highlights the 'populist fury' in Silicon Valley, while The Guardian emphasizes the massive financial opposition, noting that the ultra-rich are spending over $1 million a day to defeat the tax.

Why it matters

The outcome of Proposition 40 will determine whether California becomes the first jurisdiction in the world to implement a billionaire wealth tax. The result will have significant implications for state healthcare funding, the future of the state's tax base, and the broader national debate on taxing the ultra-wealthy. It also sets a precedent for other states considering similar measures, as noted by Regan, who believes California is a 'coming attraction' for such policies.

What to watch

Voters will cast ballots on November 3, 2026. If Proposition 40 passes, California's Franchise Tax Board will begin the complex process of valuing global assets and determining residency for the targeted billionaires. If it fails, the state will face continued challenges in funding healthcare and education, potentially leading to closures of hospitals and clinics as warned by healthcare advocates. The result will also influence the political landscape for future wealth tax proposals in other states.