California’s Prop 40 Ballot Measure Faces Ultra-Wealthy Opposition

Californians are set to vote on a ballot measure that could mark a tipping point in the fight to tax the ultra-wealthy.

Proposition 40, known colloquially as the billionaire tax, would impose a one-time 5% levy on the assets of the roughly 250 billionaires who are California residents. It would be the first U.S. wealth tax aimed expressly at billionaires, setting a new benchmark for other states and potentially boosting efforts to pass similar legislation at the federal level.

“If the California billionaire tax passes, it is a historical turnaround showing that democracy can finally fight back against the growing wealth and power of billionaires,” Emmanuel Saez, a UC Berkeley economist who helped draft the tax plan, told JS in an email.

Supporters of the proposal, championed by the SEIU-United Healthcare Workers West union, estimate it would raise $103 billion in revenue to offset a state funding shortfall caused by the Trump administration’s cuts to healthcare and food assistance. Billionaires would have the option to pay in a lump sum in 2027 or cough up 1% of their wealth per year over five years. But first, the measure must overcome major hurdles, including rival referendums and negative ads bankrolled by the wealthy, as well as warring viewpoints on the left.

Billionaires have spent upwards of $180 million opposing the proposal, arguing it would prompt wealthy residents to flee the state and deplete its tax revenue over the long term. Some prominent Democrats, including Gov. Gavin Newsom, have sided with the initiative’s wealthy opponents, worried that businesses will pull out of California, while progressives like Sen. Bernie Sanders (I-Vt.) and Rep. Ro Khanna (D-Calif.), have lobbied in the measure’s favor.

Likely voters appear to be split: 45% backed the tax, 42% opposed it and 13% remained undecided in a September UC Berkeley survey. Opponents are expected to increase their spending in the run-up to Election Day — in a bid to further undermine its backing — as SEIU-UHW counters with phone-banking and door-knocking.

“If this passes in spite of all the money the billionaires are throwing at defeating Prop. 40, it will be a very big deal because it proves that the billionaire class is not invincible,” Georgetown University tax law professor Dorothy Brown told JS.

Billionaires in California saw their wealth increase by 144% between 2023 to 2025, while the adjusted gross income of all of the state’s residents grew by just 17%, according to a working paper from Saez, Paris School of Economics professor Gabriel Zucman and PSE researcher Jasper Boll. As of mid-2026, they estimate, the combined wealth of the state’s billionaires was roughly $2.3 trillion, or the equivalent of half of the state’s annual GDP.

Prop. 40 would hit billionaires with some big tax bills since it takes aim at their full wealth rather than their annual income.

While typical Americans pay ordinary income tax, much of billionaires’ wealth is tied up in unrealized capital gains that aren’t taxed until their stock is sold. The ultrarich often borrow against these assets at low rates to fund lavish lifestyles, then pass much of their wealth to heirs as tax-free inheritance.

“Often billionaires own their companies, and they give themselves a really low salary, and it’s the salary that’s subject to income taxes, right?” Brown said. “So if they never sell their stock, they don’t have income, but their balance sheet increases every year when the value of the stock increases.”

The country’s wealthiest billionaires paid approximately 24% of their income in state, local and federal taxes between 2018 to 2020, compared to the 30% rate that other U.S. taxpayers paid, researchers including Saez and Zucman found in a paper published last year. The two estimate that billionaires in California paid only 0.2% of their wealth in annual state income taxes from 2023 to 2025.

“We have an alarming level of inequality in this country that’s just growing so quickly,” Carl Davis, the research director at the left-leaning Institute on Taxation and Economic Policy, told JS. “It’s not something to be sticking our heads in the sand about. I think this [measure] is designed to address a real shortcoming in our current tax code.”

Meanwhile, working-class voters in the state are grappling with soaring costs on everything from housing to fuel to healthcare. In a May poll from the Public Policy Institute of California, about half of Californians said that recent price increases had caused financial hardships for their households.

President Donald Trump’s One Big Beautiful Bill Act could worsen this dynamic by extending tax breaks for the rich and slashing federal funding for social programs like Medicaid. California’s Medi-Cal program could see $30 billion in annual cuts beginning in 2027, potentially pushing more than a million people off of insurance coverage, state officials estimate.

SEIU-UHW says the tax is designed to address that gap, even if only temporarily.

“We had to figure out: How do you get to $100 billion? And it was taxing all billionaires,” Suzanne Jimenez, the union’s chief of staff, told JS. “It was just arithmetic.”

Some advocates for taxing the rich would rather see a system that targets unrealized capital gains every year, rather than the one-off revenue boost from Prop. 40. Those who take issue with the tax’s design stress that recurring policies are needed in order for any fix to be a sustainable one.

“I sort of feel like it’s a missed opportunity to make some real changes,” Cristobal Young, a Cornell University professor who studies taxing the wealthy, told JS. “To treat unrealized gains as income and tax it at the federal level, that’s something that starts to plug this hole. It’s a federal problem — every state is facing this.”

But Jimenez said Prop. 40 was the most politically viable option. Even if Democrats flip both chambers of Congress in the midterms, Trump has championed policies that favor tax breaks, not hikes, for the richest Americans.

“As we were developing it, the one-time tax was something that voters could stomach,” she said.

Voters could also block the measure depending on how they handle the rest of their ballots.

Critics of the policy have spearheaded two competing ballot proposals that could nullify the measure if either of them garnered more votes than the billionaire tax itself: Proposition 41 would bar any new taxes that exclude revenue from the state’s spending limit, while Proposition 42 would prohibit new taxes on residents’ personal property.

Google co-founder Sergey Brin, who has taken a sharp turn to the right during the second Trump administration, is among the wealthy business executives heavily funding both poison pills. He’s also a longtime friend of Newsom.

The two propositions have thus far lagged the billionaire tax in public support. Neither had the majority backing they needed to pass in the September Berkeley poll.

Brin, venture capitalist John Doerr and Ripple Labs co-founder Chris Larsen are just a few of the billionaires who have spent millions to blanket the airwaves with negative ads. Those commercials have argued that the tax is a slippery slope to other levies, and highlighted the opposition from the governor and certain labor unions.

Prop. 40 would only levy the tax once, but some opponents, including Newsom, say they’re worried about billionaires’ threats to leave. They argue the wealthy — and would-be entrepreneurs who could bring business to the state — would be dissuaded from coming to or staying in California, since they would assume they could be taxed significantly anytime the state was in financial trouble.

Khanna has criticized Newsom, who is widely assumed to step up as a contender for the 2028 Democratic presidential nomination, for his opposition to the measure, saying he should “stop caring about [his] donors.”

“You can’t be anti-Trump and then do the bidding of Trump donors,” Khanna said in a recent interview. A Newsom spokesperson said he backs a national minimum billionaire’s tax instead of the “poorly written” state policy.

To prevent billionaires from dodging the tax, the proposal is written so that it would apply retroactively to those who were California residents as of January 2026. But a handful of ultra-wealthy individuals, such as Brin, Google co-founder Larry Page and Palantir co-founder Peter Thiel, have already moved to establish ties elsewhere since the prospective policy was announced.

Such departures could undermine the revenue the tax ultimately generates and cut into the state’s long-term income tax revenue, according to an analysis from Stanford University’s right-leaning Hoover Institution.

Past research on taxing the rich, however, has found there isn’t as much flight due to tax policy as opponents of these measures claim.

“The general story of tax migration … doesn’t reflect the actual reality of millionaires in America moving between states because that’s a very rare thing,” Young said. “These folks are generally at the height of their career. They’re not young people starting out and saying, ‘Oh, you know, where should I go to find my economic place in the world?’” (Both Young and Saez note that the newness of this policy can make its effects tougher to predict.)

A few billionaires leaving also may not have a significant long-term impact, according to an analysis from the nonpartisan California Legislative Analyst’s Office — the state would likely lose less than $1 billion per year. That’s less than 1% of the revenue that California brought in from income taxes in 2025.

Per one estimate from supporters of the billionaire tax, its projected revenues could ultimately be 25 times what billionaires paid the state in income tax last year.

And business investment in the state isn’t set to change overnight, either. Venture capitalists have only poured more funding into California companies since the potential tax was floated, Young noted.

“These people are betting on making a lot of money, and where are they betting on doing it? It’s in California,” he said.

Despite strong backing from a major union, progressive groups in California are splintered on Prop. 40, even if they generally support higher taxes on the rich. Some opposition stems from the fact that 90% of the money raised is earmarked for healthcare, while the other 10% is set aside for other public services like food assistance and education.

The powerful California Teachers Union has come out against the measure, arguing that it wouldn’t provide “sustainable and long-lasting funding” for schools and instead is pushing for an extension of state taxes set to expire in 2030. Planned Parenthood of California has accused SEIU-UHW of shutting out other healthcare advocates. Its president, Jodi Hicks, has claimed the tax could do “more damage than good,” citing potential effects on the state budget and uncertainty around how its funds could be allocated. (Hicks is a longtime political ally of Newsom, though she’s said that the group’s stance wasn’t tied to his.)

Jimenez dismissed such divisions as inconsequential infighting among Sacramento’s progressive political class.

“That’s any campaign — you have folks that are for or against it,” she said. “What we’ve shown with this campaign is that we’ve built a coalition that is broad.”

If it passes, Proposition 40 could mark a watershed moment for similar policies.

“It would encourage other states to follow suit with their own ultrarich wealth taxes and make the debate on billionaires’ taxation at the federal level front and center in the Democratic presidential primary,” Saez said.

And it would signal just how much these types of proposals are resonating with voters.

Most Americans favor higher tax rates for corporations and high-income households, a Pew Research Center poll found last year. Proposals to “tax the rich” are also increasingly popular among Democrats as concerns have grown about both inequality and the idea that the wealthiest members of society aren’t contributing their fair share. Worries about the influence and power business magnates wield over the political system have only grown.

Multiple states, including New Jersey, Washington and Massachusetts, have already confronted the ultra-wealthy in other ways. Earlier this year, Washington Gov. Bob Ferguson (D) signed a millionaires tax into law, establishing a new 9.9% tax on any income residents make over $1 million. A pied-à-terre tax in New York City, championed by Mayor Zohran Mamdani, has similarly sought to make owners of expensive secondary residences pay up.

At the federal level, Sanders and Khanna have proposed a 5% annual levy on billionaires that would similarly be used to combat healthcare cuts, fund childcare and bolster teacher salaries.

Given its size, California has often served as a model for other states on progressive policies including paid family leave, regulations for vehicle emissions and data privacy protections, among others.

“It’s the first time in the history of the world that there is a billionaire tax on the ballot,” Khanna said at a San Francisco rally in early October. “The whole world, the whole nation is watching.”