California's ultra-rich are reportedly preparing their legal strategy to fight the world's first billionaire tax if voters approve it in early November. If approved, it will be the world’s first billionaire tax.
Tech billionaires have raised more than $340 million to defeat 'Proposition 40', a one-time 5 percent wealth tax that will fund healthcare and education, the Guardian reported.
The campaign they’re funding is reportedly spending more than $1 million a day to defeat the measure, according to state financial disclosures
What is Proposition 40?
Californians will vote on the ballot measure, Proposition 40, in early November. If passed, it would require a one-time 5 per cent tax on the state’s billionaires, with the proceeds mostly funding healthcare programs, along with some education and food assistance.
Proposition 40 “imposes 5% tax on certain taxpayers with assets over $1 billion.”
The proposed California tax would go considerably further than taxing income. It targets an individual’s entire net worth and applies to billionaires who have resided in the state at any point since Jan. 1, 2026, Bloomberg reported.
The measure has divided Democrats in the state, with some giving enthusiastic support and others rejecting the proposal because it’s just a one-time levy and the bulk of it would only fund certain healthcare programs
Proponents and opponents alike are casting the billionaire tax as a potential first step toward wealth taxes in more states. With California having more billionaires than any other state, Prop 40 is seen as setting the stage for more referendums on wealth inequality throughout the country.
Who's in favour and against of Proposition 40?
California has roughly 250 billionaires, according to the New York Times.
The state’s major unions and progressive politicians such as the Vermont senator Bernie Sanders and California congressman Ro Khanna back Prop 40. Supporters include: US Senator Bernie Sanders; SEIU United Healthcare Workers West
But both the Democratic and Republican candidates for governor, as well as organisations like Planned Parenthood Affiliates of California, a lobbying branch of the healthcare group, oppose it. Opponents include: California Primary Care Association; California School Boards Association; California Taxpayers Association
Among its fiercest critics are the tech billionaires it would most directly apply to.
How do billionaires plan to fight weather tax?
The California Business Roundtable, a lobbying group representing some of the state’s most powerful companies, would take point on the legal challenges, Chief Executive Officer Rob Lapsley was quoted by Bloomberg as saying.
The group, which represents technology, energy and other corporate interests in the state, has retained Elizabeth Prelogar, the Biden Administration’s top lawyer at the US Supreme Court, to help lead the efforts, Lapsley said.
“Our approach to defeat Proposition 40 is based on a comprehensive strategy that includes both the ballot box and the courts,” Lapsley said in a statement to Bloomberg News. “We will be fully prepared to file a legal challenge immediately after the election should we need to defeat this measure in the courts.”
The group is working closely with the billionaires affected by the tax to formulate a legal strategy, sources told Bloomberg.
Opponents of wealth taxes had reportedly hoped the Supreme Court would use the case, Moore v. United States, to establish constitutional limits on the taxation of unrealised gains. The court ultimately upheld the tax while avoiding a sweeping ruling that could have broader implications for wealth taxes.
The California Business Roundtable has raised at least $700,000 to oppose Proposition 40 through its political arm, according to campaign filings cited by the report.
Ad strategy
Earlier, the campaign fighting the billionaire tax placed an ad on television, digital and streaming platforms across California. It starts with quiet, foreboding music and the president of the California Medical Association, René Bravo, dressed in a white lab coat, saying: “The people pushing Prop 40 say it’s supposed to improve healthcare. That’s not true," according to The Guardian.
The campaign reportedly debuted similar ads claiming that teachers, carpenters and firefighters also oppose the wealth tax, calling it “a dangerous experiment”.
The messaging around the campaign centers on how the tax would hurt “doctors, teachers, small businesses, working families and public safety”, without mention of the state’s billionaires. The no on Prop 40 campaign calls it “an everyone tax”.
The three campaigns against the wealth tax, however, draw nearly all of their funding from Super Pacs loaded with Silicon Valley money, according to campaign finance filings.
Since July, the committees opposing Prop 40 and supporting Props 41 and 42 have received a total of more than $297.8 million, most of that from a Super Pac called Building a Better California, the report added.
The three campaigns are spending much of their fortunes on an army of consultants tasked with everything from lobbying politicians to working on media strategy.
The consultants include the Republican-leaning law firm Nielsen Merksamer, known for fighting on behalf of tobacco companies, and the political consultancy PCI Campaigns, known for battling propositions that sought to repeal the death penalty and require condom use in pornographic films.
Who are the biggest donors of the campaign?
The donors to the 'No' campaign are the who’s who of Silicon Valley, including the Palantir co-founder Peter Thiel, former Google CEO Eric Schmidt, DoorDash CEO Tony Xu, Stripe CEO Patrick Collison, crypto magnate Chris Larsen and several prominent venture capitalists, The Guardian reported.
The biggest donor, by far, is the Google co-founder Sergey Brin, who has contributed at least $102 million to fight the tax, according to campaign finance filings.
The runner-up is Schmidt, who has donated more than $42m.
For comparison, the yes on 40 campaign has raised a total that’s just shy of $33 million, mostly from the healthcare union sponsoring the measure.
Will this proposal pass?
According to the Guardian, recent polling on Prop 40 shows that it’s favoured to pass, but its lead has shrunk over the last few weeks as the opposition campaign has increased spending.
A late-September poll by the University of California shows 45% of voters likely to vote yes on the tax with 42% voting no. Just a month earlier, the proposal enjoyed a 7% lead.
What will stop the billionaire tax?
There are two separate countermeasures that Prop 40’s opponents successfully placed on the November ballot. These are Proposition 41 and 42.
Prop 41 directly targets the billionaire tax, while Prop 42 is more of a general proposal to protect individuals from certain new taxes.
If either of these measures receives more yes votes than Prop 40, they will stop the billionaire tax from taking effect – even if it passes, the report added.