California voters reject billionaire wealth tax

SACRAMENTO, Calif. — California voters have rejected a first-in-the-nation tax on billionaires’ wealth, ending a costly fight that split Democrats and prompted some of the state’s richest residents to threaten to leave.

Proposition 40 would have imposed a one-time 5% tax on the net worth of California residents worth more than $1 billion as of Jan. 1, 2026. About 200 people would have been affected. Results showed 52.8% of voters opposed the measure, according to KTVU.

The Associated Press confirmed the outcome Monday after the measure trailed for days, CalMatters reported.

A union-backed measure

The measure was sponsored by SEIU-United Healthcare Workers West, which said it would raise about $100 billion for health care and education. Supporters said the money was needed to offset Medi-Cal cuts in the federal tax and spending law Republicans passed last year.

Backers argued that the state’s wealthiest residents gained the most from the federal tax breaks and could afford to pay more. They said the tax would help keep hospitals and emergency rooms open.

Opponents said the tax would push billionaires and their companies to leave California, shrinking the state’s tax base. California already relies heavily on high earners, with the top 1% of taxpayers paying nearly half of all personal income tax revenue.

The state’s nonpartisan Legislative Analyst’s Office had estimated the measure would raise tens of billions of dollars in its first few years. But it projected that income tax collections could later fall by hundreds of millions of dollars a year as wealthy taxpayers adjusted their behavior or moved.

Newsom opposed it

Gov. Gavin Newsom, a Democrat, was one of the measure’s earliest opponents. He tried to negotiate a deal to keep it off the ballot and endorsed a countermeasure backed by wealthy donors. Newsom has said he favors a national wealth tax instead of a state one.

Meta CEO Mark Zuckerberg said in the weeks before the election that he would likely leave California if the tax passed.

Wealthy opponents donated $378.4 million to defeat Proposition 40, including money for two competing measures.

Countermeasures

Proposition 41 requires the state auditor to review programs funded by proposed special taxes before they appear on the ballot. It also bars retroactive taxes on past earnings except in emergencies such as fires or floods. It passed with 52% of the vote.

Proposition 42, which would bar future wealth taxes, was leading 51.6% to 48.4% on Monday evening. If it passes, it could block the union from trying again.

Voters also defeated Proposition 44, another union-backed measure that sought to control how clinics spend money.

What comes next

A spokesperson for Building a Better California, which opposed the tax, said the measure would have limited revenue for all state services by driving economic activity out of California.

Supporters said Monday the state still faces “enormous pressure” to find other ways to pay for health care affected by federal cuts.

The result is likely to be watched closely in other states where progressive groups have floated taxes on wealth. No state currently levies a broad tax on accumulated net worth.

The vote came as Democrats elsewhere won sweeping victories in congressional races. Several Democratic leaders have pledged to revisit parts of last year’s federal tax law when the new Congress convenes in January, though any changes would need President Donald Trump’s signature.