California voters have rejected Proposition 40, which would have made the state the first in the nation to tax billionaires on their net worth. The called the race Monday, six days after Election Day. The defeat capped a fight that split Democrats at the top.
California Governor Gavin Newsom, who is considering a run for president in 2028, opposed the tax, warning it would drive the state’s wealthiest residents away. Senator Bernie Sanders and Representative Ro Khanna, two leading progressive lawmakers, championed it. In the Secretary of State's semi-official count as of 5:14 p.m.
Monday, 5,789,026 voters (52.9 percent) had rejected the measure and 5,159,356 (47.1 percent) had supported it. Opponents outraised supporters about tenfold. Building a Better California, the committee that led the opposition, raised more than $333 million, and Google co-founder Sergey Brin alone gave more than $100 million.
The measure would have charged billionaires who lived in California on January 1, 2026, a one-time tax of 5 percent of their net worth, due in 2027, according to the nonpartisan Legislative Analyst's Office analysis in the official voter guide. Ninety percent of the money would have gone to health care, and the rest to education, food assistance and the cost of running the tax. The sponsoring union, SEIU-United Healthcare Workers West, projected about $100 billion.
The analyst's office estimated "tens of billions of dollars spread over several years," along with a "possible ongoing decrease of less than $1 billion per year" in state income tax collected from billionaires. Economists disagreed sharply about whether the state would come out ahead. A Hoover Institution paper estimated the tax would raise about $30 billion, less than a third of the union's projection, partly because nearly 30 percent of the tax base had already left the state.
Counting income tax lost as billionaires leave, it put the measure's net value to the state at negative $38.9 billion. The measure's drafters argued the opposite. A National Bureau of Economic Research paper, co-written by one of them, estimated the tax could raise about $100 billion.
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