Taxes in focus as Californians vote on Proposition 40 billionaire tax

Voters in California are deciding on Proposition 40, a measure that would impose a one-time 5% tax on the net worth of residents worth more than $1 billion. The vote, which requires a simple majority, has drawn national attention as one of the most closely watched tax questions of the election season. Supporters say it could raise $100 billion over five years, while opponents question that figure.

What the measure would do

Proposition 40 would levy the one-time tax on California residents with a net worth of at least $1 billion, excluding real estate and certain retirement assets. Supporters say 90% of the revenue would go to healthcare programs and the remaining 10% to education, food assistance and administration of the tax. If passed, it would be the first state tax on net worth, according to CNBC.

Backers argue the state needs money to offset federal healthcare cuts approved in 2025 under the law known as H.R. 1, the "One Big Beautiful Bill Act," and to protect hospitals, clinics and Medi-Cal services. They also argue that large fortunes grow through stock market gains and rising business valuations, which are not taxed as income until they are realized.

A divided campaign

The measure has split groups that usually align with the Democratic Party. The California Democratic Party and labor unions, including SEIU Healthcare Workers West, back it. Governor Gavin Newsom, former Orange County Rep. Katie Porter, the California Medical Association and the California Teachers Association oppose it.

Newsom and Porter, who have both backed higher taxes on corporations and wealthy individuals, argue the proposal could push wealthy residents to leave the state and reduce tax revenue over time. Newsom has said he prefers taxing billionaires at the federal level and that a California-only wealth tax would be limited to health care. Opponents also say the initiative does not guarantee how money would be allocated among providers and services.

Wealthy opponents have contributed tens of millions of dollars. Most of the money has gone to Building a Better California, which had raised more than $250 million against the tax as of October 28, according to CBS News. Donors named in reports include Google co-founders Sergey Brin and Larry Page, Peter Thiel, Vinod Khosla and Patrick Collison. Supporters have also pointed to a $300 million advertising campaign funded by tech billionaires and business groups.

Competing measures and disputed estimates

Two rival measures could affect the outcome. Proposition 41 would prohibit new taxes that disregard voter-approved spending limits. Proposition 42 would permanently ban any new statewide tax on personal property, which the ballot language defines as things people own other than real estate, and bar new retroactive taxes, including on retirement and savings accounts. Both were submitted by Building a Better California, and both would take effect over Proposition 40 if they receive more votes.

Tax experts quoted by CNBC say worries about retirement accounts could give Proposition 42 strong support. Jared Walczak of Walczak Policy Consulting said both Proposition 41 and Proposition 42 could win majority support. Opponents of Proposition 42 describe it as another billionaire-funded measure.

Estimates of revenue also differ. A Stanford University study concluded that Proposition 40 may raise about $30 billion rather than the $100 billion projected by its proponents. The same study said billionaires who have already left the state, including Brin, Page and Thiel, have removed about $540 billion, or 30%, of California's billionaire wealth from potential taxation. Economists Daron Acemoglu and Joseph Stiglitz, both Nobel laureates, support the measure. In an open letter they wrote that billionaires paid "only 1.6%" of their $1.4 trillion wealth gain in California income tax between 2019 and 2025.

A Public Policy Institute of California poll found 46% of likely voters supporting the measure and 52% opposed, a gap supporters partly attribute to the advertising spending. Nvidia CEO Jensen Huang, whose estimated net worth is about $200 billion, has said he supports the measure. "I don't mind paying taxes," he told CBS News.

What happens next

Results will determine whether Proposition 40 takes effect and whether Propositions 41 or 42 could override it. The Stanford estimate and the $100 billion projection remain disputed, and the final revenue impact would depend on how the measure is implemented if it passes. Proponents and opponents have both said the outcome will be watched as a signal for other states and federal policymakers considering taxes on extreme wealth.

Keywords: taxes, billionaire tax, Proposition 40