California’s $100 Billion Billionaire Tax Heads for Defeat as Voters Reject Proposition 40

California voters are rejecting a proposed 5% tax on billionaire wealth after a record-breaking opposition campaign financed by some of Silicon Valley’s wealthiest figures, while a competing measure restricting future wealth taxes gains support.

By yourNEWS Media Newsroom

SACRAMENTO, Calif. — California’s proposed billionaire wealth tax appeared headed for defeat Thursday, Nov. 5, after voters rejected Proposition 40 by a double-digit margin in early election returns, delivering a major setback to labor unions and progressive groups seeking to impose a new tax on the state’s wealthiest residents.

With approximately 61% of the estimated vote counted, Proposition 40 was trailing 55.2% to 44.7%, according to Associated Press election results published by KQED. The measure required a simple majority to pass, although the race had not been officially certified.

The proposed tax would have imposed a one-time 5% levy on the net worth of California residents and qualifying trusts with assets exceeding $1 billion. Approximately 200 billionaires would have been affected, including some of the nation’s most prominent technology executives and investors.

Supporters projected the measure could generate approximately $100 billion over five years, although California’s nonpartisan Legislative Analyst’s Office estimated revenues more conservatively at tens of billions of dollars.

Under the proposal, 90% of the proceeds would support health care programs, with the remaining 10% directed toward food assistance and education.

The initiative was sponsored by Service Employees International Union-United Healthcare Workers West, which argued that additional revenue was necessary to offset reductions in federal health care funding.

Opponents warned that taxing wealth rather than income could encourage wealthy individuals to relocate, potentially reducing California’s future income tax collections and discouraging investment.

The campaign became one of the most expensive ballot measure battles in California history.

According to CalMatters, billionaire opponents and business interests contributed approximately $316.7 million toward defeating Proposition 40 and supporting competing ballot measures designed to restrict wealth taxation.

Google co-founder Sergey Brin emerged as a leading financial backer of the opposition, contributing approximately $102 million to Building a Better California, an organization established to fight the proposed tax.

Other wealthy technology executives and investors, including Google co-founder Larry Page, Oracle founder Larry Ellison and PayPal co-founder Peter Thiel, became central figures in the debate over California’s proposed tax policies.

Several prominent billionaires relocated residences or business operations outside California as the initiative advanced, although their individual financial and personal motivations varied.

The initiative’s residency provisions made the timing of those decisions particularly important.

Proposition 40 would have applied to individuals who were California residents on Jan. 1, 2026, with their net worth generally assessed as of Dec. 31, 2026.

That arrangement meant qualifying residents could have faced substantial tax liabilities even if they subsequently moved elsewhere.

In a RealClearPolitics report examining the election’s consequences, the proposed tax was described as a major factor in decisions by wealthy individuals to establish residences or relocate business interests outside the state.

The ballot measure also divided California Democrats.

Gov. Gavin Newsom opposed Proposition 40, warning that it could weaken the state’s economy and encourage wealthy taxpayers to leave.

Newsom supported Proposition 42, a competing initiative designed to prohibit new state taxes on certain forms of wealth, including financial assets and private businesses.

Proposition 42 also sought to prohibit retroactive wealth taxation and contained provisions that would nullify Proposition 40 if the competing measure received more votes.

Early returns showed Proposition 42 winning majority support, creating another obstacle to the billionaire tax even if Proposition 40’s remaining ballots produced an unexpected reversal.

A second competing measure, Proposition 41, would have imposed additional requirements on special-purpose tax programs and strengthened financial oversight provisions. That proposal was also trailing in early returns.

Supporters of the billionaire tax included Sen. Bernie Sanders, I-Vt., Rep. Ro Khanna, D-Calif., the California Democratic Party and organized labor groups.

They argued that the state’s wealthiest residents should contribute more toward essential public services, particularly as health care programs face financial pressure.

The initiative’s supporters also disputed warnings of an exodus of wealthy taxpayers, pointing to economic research suggesting that the measure could generate substantial revenue without significantly reducing California’s overall tax base.

Opponents challenged those assumptions, arguing that taxing unrealized investment gains and privately held business assets could create valuation disputes, liquidity problems and litigation.

The campaign also featured competing economic estimates.

Researchers supporting the initiative projected approximately $100 billion in revenue over five years, while state fiscal analysts warned that the amount collected would depend heavily on taxpayer responses and implementation.

The Legislative Analyst’s Office also cautioned that departures by wealthy residents could reduce annual income tax revenue by hundreds of millions of dollars.

Following the election, proponents signaled that the effort to tax billionaire wealth would continue.

Dave Regan, president of SEIU-United Healthcare Workers West, said the union could return with another initiative in 2028 if California lawmakers failed to address health care funding shortages.

“That’s not a hypothetical. That’s our plan,” Regan said, according to CalMatters.

The outcome comes despite broader Democratic victories in Tuesday’s elections, demonstrating that voter support for Democratic candidates did not necessarily translate into approval of every progressive tax proposal.

A Los Angeles Times analysis published Thursday examined why the measure struggled to attract the voter support its backers had anticipated.

Although California’s final vote count remains incomplete, Proposition 40’s substantial deficit and the apparent success of the competing tax restrictions indicate that the state’s proposed billionaire levy faces defeat.

The result marks a major victory for the initiative’s wealthy opponents and leaves California lawmakers confronting unresolved disagreements over how to finance public services without jeopardizing the state’s tax base.