The proposal would impose a one-time 5% tax on billionaire wealth to fund health care, while opponents warn of economic consequences and competing ballot measures.
California voters will decide on November 3, 2026, whether to impose a one-time 5% tax on the wealth of the state’s billionaires. Proposition 40 would direct most of the money toward health care, but the proposal has sparked a major political fight involving labor unions, technology executives, business groups and prominent Democrats.
Supporters argue that the tax could help protect medical services threatened by federal funding cuts under President Donald Trump. Opponents warn that targeting billionaire wealth could encourage wealthy residents to leave California, potentially reducing state tax revenue and investment.
How Proposition 40 Would Work
The proposal would apply to individuals who were California residents on January 1, 2026, and had a net worth exceeding $1 billion. It would tax covered wealth rather than annual earnings, marking a significant departure from the state’s existing approach to taxation.
Under Proposition 40, qualifying billionaires would owe a one-time tax equal to 5% of their net worth. Payments would be due in 2027, although taxpayers could choose to spread them over five years at an additional cost.
The tax would cover assets such as stocks, business interests, intellectual property, art and collectibles. Real estate, pensions and certain retirement accounts would generally be excluded.
According to the California Legislative Analyst’s Office, the measure would probably generate tens of billions of dollars over several years. The exact amount remains uncertain because asset values fluctuate and taxpayers could take steps to reduce their liabilities.
Supporters Say Health Care Funding Is at Risk
Supporters have offered a more specific estimate. Dave Regan, a leader of SEIU United Healthcare Workers West, believes the proposal could generate approximately $100 billion over five years.
Regan told CBS News that the tax was intended to address a serious financial threat to California’s health care system. He linked that threat to federal Medicaid reductions included in Trump’s major tax and spending legislation.
Regan warned that millions of Californians could lose health insurance and that hospitals, clinics and emergency rooms could face closures. He also acknowledged that reductions in health care funding could threaten jobs represented by his union.
The proposed revenue would be divided among several public programs. Ninety percent would support health care services, while the remaining 10% would fund education, food assistance and costs associated with administering the tax.
Much of the health care debate centers on Medi-Cal, California’s health insurance program for low-income residents. State and federal governments together spend more than $200 billion annually on California health care programs, according to the Legislative Analyst’s Office.
Regan acknowledges that a one-time tax cannot permanently replace reductions in federal support. Supporters view the money as temporary relief that could give state officials time to develop longer-term funding arrangements.
Critics Warn of Wealthy Residents Leaving California
However, the proposed tax has encountered opposition from several political and economic groups that do not ordinarily share the same positions.
Democratic Governor Gavin Newsom has criticized Proposition 40, arguing that its design could damage California’s economy. Former Democratic Congresswoman Katie Porter has also expressed concern despite her longstanding support for higher taxes on wealthy Americans.
Porter told CBS News that the proposal could encourage billionaires to relocate to other states. She warned that losing wealthy residents could permanently reduce California’s ability to collect income taxes from them.
California relies heavily on income tax payments from high earners, including those receiving substantial capital gains. If wealthy taxpayers leave, the state could lose some of that revenue even after collecting the proposed wealth tax.
The Legislative Analyst’s Office estimates that behavioral changes among billionaires could reduce ongoing state income tax collections by less than $1 billion annually. Those losses would affect the General Fund, which supports education, health care, prisons and other public services.
The debate has intensified following reports that several prominent technology figures have moved away from California. They include venture capitalist Peter Thiel and Google co-founders Larry Page and Sergey Brin.
Those departures have become a major argument in the campaign, although individual relocation decisions do not establish how much long-term revenue the tax would cost California.
Opponents also argue that the state could face challenges valuing privately held businesses, intellectual property and other assets that are not traded on public markets. Tax administrators would need to determine those values and resolve disputes over assessments.
Competing Ballot Measures Could Block the Tax
Another unusual feature of the election is the presence of two competing measures, Propositions 41 and 42, which could interfere with Proposition 40.
Proposition 41 would restrict new state taxes that exclude their revenue from constitutional spending limits. Proposition 42 would prohibit certain taxes on personal property and taxes applied retroactively.
The Legislative Analyst’s Office warns that Proposition 40 could be prevented from taking effect if either competing measure receives more affirmative votes, even if the wealth tax itself wins majority support. The interaction among the measures could also become the subject of litigation.
Campaign Spending Reflects the Stakes
The campaign has attracted substantial financial contributions. California Secretary of State records showed approximately $32.2 million reported in support of Proposition 40 and $99.6 million in opposition through October 6, although additional spending has been reported since that date.
Supporters include Senator Bernie Sanders and SEIU United Healthcare Workers West. The opposition includes organizations representing taxpayers, schools, medical providers and businesses, showing that concerns extend beyond the state’s wealthiest individuals.
The Broader Debate Over Taxing Wealth
The tax debate also involves a broader disagreement about how investment wealth should be treated. Under existing tax rules, an investor generally does not owe capital gains taxes simply because shares increase in value. Taxes usually arise when those investments are sold.
Ray Madoff, a professor at Boston College Law, has argued that this structure allows extremely wealthy Americans to accumulate enormous fortunes without paying annual taxes on unrealized gains. She believes Proposition 40 could help encourage a national discussion about changing federal tax policy.
Madoff also recognizes that a California-only measure would not resolve the broader questions surrounding wealth taxation. State governments face different constraints than federal authorities, particularly because wealthy residents and businesses can relocate.
Nvidia chief executive Jensen Huang has also commented publicly on the issue, expressing support for paying taxes while raising questions about how governments spend public money. His remarks reflect another part of the debate: whether additional revenue would produce improvements in services.
Polls Show a Closely Divided Electorate
Recent surveys have shown sharply divided voter opinions. A September Berkeley Institute of Governmental Studies poll found 45% support and 42% opposition among likely voters, with 13% undecided.
The margin between support and opposition was small, and other surveys have produced different results. Those differences make the final vote difficult to assess from any single poll.
For voters, Proposition 40 presents several separate questions involving tax fairness, health care funding and the state’s long-term finances. The outcome will also depend partly on the results of Propositions 41 and 42.
California’s November 3 election will determine whether the state adopts the proposed billionaire wealth tax and whether competing constitutional restrictions prevent it from taking effect.
IMAGE: Source Own work Author Monaam Ben Fredj This file is licensed under the Creative Commons Attribution-Share Alike 4.0 International license.