California voters will decide next month whether to impose a much-debated one-time tax on the state’s billionaires, but approving the controversial measure may not be enough for it to become law.
Proposition 40, informally known as the Billionaire Tax Act, would impose a one-time 5 percent tax on Californians with more than $1 billion in assets, including shares of capital stock, bonds or other evidence of indebtedness, and any legal or equitable interest. The measure, which would work retroactively and apply to taxpayers residing in the state as of January 1, 2026, would potentially impact hundreds of locally based billionaires.
According to supporters, the ballot initiative has the potential to raise about $100 billion over five years if passed, with the money earmarked primarily for healthcare and other public programs. But the tax has plenty of opponents, even in the state’s liberal ranks, as some California Democrats are afraid of alienating wealthy tech donors who have been propping up their campaigns over the past decade or so.
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Among the most prominent opponents to Proposition 40 are Governor Gavin Newsom and gubernatorial candidates Xavier Becerra, a Democrat, and Steve Hilton, a Republican. The ballot initiative is sponsored by the labor union SEIU United Healthcare Workers West and counts independent Vermont Senator Bernie Sanders, Democratic California Representative Ro Khanna and the Democratic Party of California among its most vocal supporters.
Ultimately, it will not just be down to a battle between the "Yes on Prop 40" and the "No on Prop 40" teams. Even if the measure obtains a majority support by California voters, two other initiatives on the ballot could leave the billionaire tax dead in the water.
Newsweek contacted Newsom’s office, the Democratic Party of California, SEIU United Healthcare Workers West and Building a Better California for comment by email on Tuesday morning.
Measures That Could Kill Billionaire Tax
On November 3, voters will also decide on Proposition 42 and Proposition 41, competing measures that could prevent Proposition 40 from taking effect.
Under the ballot rules, Proposition 40 would be nullified if Proposition 42, or another competing measure, Proposition 41, receives more votes. On the other hand, Proposition 40 also contains a competing-measure provision that would nullify Propositions 41 and 42 if it receives more votes.
Propositions 41 and 42 are sponsored by Building a Better California, a group established by Google co-founder Sergey Brin and former Google CEO Eric Schmidt.
Brin, a centibillionaire, has an estimated net worth of $26.57 billion, according to Forbes, and boasts three multimillion-dollar homes in California in his real estate portfolio. Schmidt’s net worth is estimated at $39 billion. With his wife, he owns a $100 million manor in Holmby Hills, Los Angeles.
Proposition 41 would essentially limit the state’s ability to introduce new taxes. If passed, it would require pre-election audits for ballot initiatives proposing special taxes once they report collecting 25 percent of signatures to be included in the voter information pamphlet if it qualifies for the ballot; require state laws or ballot initiatives levying a new special tax enacted after January 1, 2026, to undergo state audits every four years to determine program effectiveness and cost-saving measures; and prohibit the state from enforcing any tax that is exempted or excluded from the state spending limit enacted or effective on or after January 1, 2026.
Proposition 42 would prohibit the enactment of new taxes after January 1, 2026, on ownership or control of retirement holdings, individually owned assets, and other forms of personal savings and retroactive taxes that result in a tax liability based on conduct, activities, or a status that occurred or was present prior to the effective date of the tax.
Both measures state that if the initiative receives more votes than a competing measure, they would prevail in its entirety over any other measures on the November ballot related to taxing personal assets.
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What to Know
Proposition 40 has emerged as one of California’s most closely watched ballot measures this November.
Supporters argue that billionaires can afford to contribute more and that the revenue is needed to protect public services. Opponents contend that the measure risks driving wealthy residents out of California, potentially damaging the state’s tax base over the longer term.
The unusual ballot fight intensified after Governor Gavin Newsom endorsed Proposition 42. Newsom has opposed the billionaire tax while arguing that taxing extreme wealth should instead be tackled nationally.
“We all agree that Californians deserve to have their retirement and life savings protected from new state taxes so those savings are there when they need them,” Newsom said in a statement released by Proposition 42’s proponents.
The contest appears far from settled. A University of California, Berkeley Citrin Center-Politico poll cited by The Hill found that 45 percent of registered voters supported Proposition 40, 43 percent opposed it and 12 percent remained undecided.
Opponents of the billionaire tax also appear to hold a substantial financial advantage. CalMatters’ voter guide reported committees supporting Proposition 40 had raised $31.7 million, compared with $99.8 million on the opposing side.
That leaves Californians facing an unusually complicated decision on November 3—not simply whether they support taxing billionaires, but how their votes across competing propositions could determine whether such a tax ever becomes law.
Contact Newsweek editors on this story: Ben Kelly and Dave Siminoff.