California voters approve constitutional ban on new wealth taxes

Billionaire-funded measure leads by 2.6 points with 96% counted

California voters had a chance to impose the nation’s first-ever tax on billionaires’ assets. Instead, they voted to ban wealth taxes altogether.

The Associated Press said late Friday that Proposition 42, a ballot initiative prohibiting California from imposing new taxes on financial assets or other personal property besides real estate, was set to pass. The measure was leading by a 2.6-point margin with an estimated 96% of votes counted following the Nov. 3 election, AP said.

The result also settled the fate of Proposition 40, a one-time 5% tax on California billionaires’ net assets that appeared on the same November ballot. A healthcare-workers’ union proposed the measure to offset looming Medicaid cuts, and it fell short of the majority needed to pass, the AP said on Nov. 9.

Proposition 42 was one of several ballot measures funded by billionaires including Google co-founder Sergey Brin, venture capitalist John Doerr and Stripe co-founder Patrick Collison as part of a nearly $400 million effort to defeat the proposed wealth tax. It was one of two measures that gathered enough voter signatures to reach the ballot, and voters turned down the other one.

The rival measures carried language that would have conflicted with the billionaire tax. They also forced the healthcare union to spend most of the funds it had available earlier this year gathering signatures, leaving the tax’s supporters with limited remaining funds to counter advertising, text messages and mailers claiming that the levy was a step toward taxing ordinary Californians’ retirement accounts.

Proposition 42 could make it harder for progressives to take another swing at taxing billionaires’ wealth, an effort they have said remains on their agenda. Because the newly passed initiative amends the state constitution, lawmakers who wanted to tax wealth through legislation would face a major hurdle, should they ever wish to do so.

California’s broad allowances for direct democracy mean Proposition 42 may not stop proponents from trying another wealth-tax ballot initiative. The head of the healthcare union that proposed the California billionaire tax has already floated putting a similar measure on the ballot in 2028 if the Medicaid cuts remain in effect.

Progressives say they learned important lessons in the failed California campaign and remain committed to taxing billionaires’ wealth.

“Just as the billionaires amended the constitution to prevent a future wealth tax, the citizens of the state can amend the constitution to allow and impose one in a single constitutional amendment,” said Robert “Perl” Perlmutter, a partner at San Francisco law firm Shute, Mihaly & Weinberger.