Opposition campaign raised roughly 10 times as much as supporters
California voters rejected Proposition 40 after voting concluded Nov. 3, defeating the first-in-the-nation measure to tax the wealth of Californians whose net worth exceeds $1 billion. Had it passed, the measure would have imposed a one-time 5% tax on that wealth. The contentious ballot fight generated substantial spending by some prominent tech leaders.
Most of the revenue would have backfilled federal funding cuts to healthcare, and 10% would have gone to education and food-assistance programs. SEIU United Healthcare Workers West, which backed the tax, said it was necessary to replace an estimated $100 billion California will lose in federal healthcare funding over five years.
Proposition 40 was the nation’s biggest test yet of an approach progressives have long championed: raising taxes on the ultra-rich by targeting the main way they make their money, through investments as opposed to the paychecks they receive from work. Critics of the measure said it would have prompted ultrawealthy taxpayers to leave California.
The “no” side raised roughly 10 times as much as the “yes” side. Google co-founder Sergey Brin alone put more than $100 million into a political action committee working to defeat the measure. Billionaires donated millions of dollars to Building a Better California, which also backed other measures on the ballot designed to nullify the tax. The committee raised more than $333 million, nearly a third of which came from Brin.
Brin and his fellow Google co-founder Larry Page were among the billionaires who started cutting ties with the state in anticipation of the possible tax. Mark Zuckerberg, another tech mogul, said he would remain in California for eight years and made a deal with Meta to help him pay the tax without losing his ownership stake in the company.
Some traditional Democratic allies, including Planned Parenthood and the California Medical Association, were part of a coalition opposing the measure. The coalition said it was concerned about how tax revenue would be divided and about the potential impact on California’s budget if there was a mass exodus of wealthy taxpayers. California’s budget relies heavily on the income tax of the state’s richest residents.
The opposition coalition said in a statement: “Proposition 40 was a reckless experiment conducted on our state’s economy with little regard for the harms it would cause.”
Robert Swonger, an auto glass technician living near Sacramento who is politically independent, said before voting concluded Nov. 3 that he planned to vote against the measure. “Obviously, I would like billionaires not to have as much money as they do,” Swonger said. “But I don’t believe taxing them out of existence is going to work.”
California Gov. Gavin Newsom, who was deciding whether to run for president in 2028, opposed Proposition 40, and the measure’s failure was a win for Newsom and other Democratic leaders who opposed it. Newsom said a California wealth tax would disadvantage the state.
The measure attracted support from liberal leaders beyond the state, including Vermont Sen. Bernie Sanders, who rallied in cities across California in the campaign’s closing weeks to urge voters to pass it. Days before Sanders held rallies in California cities last month, Newsom told reporters that the senator’s focus on wealth inequality was “spot-on.” But he said that “on this issue, we fundamentally disagree.”
Supporters of the California tax started running ads recently in New Hampshire, New Mexico and Virginia, states that will vote early in the Democratic presidential primary in 2028, criticizing Newsom for his opposition to the measure.
The rejection did not settle the wider policy debate. Progressive politicians, including Sanders and Massachusetts Sen. Elizabeth Warren, have long supported a federal wealth tax, while Newsom said he supports a national minimum tax on anyone with a net worth above $100 million.