California voters reject billionaire tax proposal, defeating Proposition 40. What it means

California voters have rejected a proposed billionaire tax, according to The Associated Press, delivering a major setback to an initiative that would have introduced the nation's first wealth tax by targeting residents with net worths exceeding $1 billion. Under Proposition 40, California would have imposed a one-time tax of 5% on the personal assets of billionaires, with the majority of the revenue allocated to health care.

Although Democratic voters, who make up the majority of California's electorate, generally favor higher taxes on wealthy individuals, the proposal exposed divisions among Democratic leaders. Governor Gavin Newsom opposed the measure, while the California Democratic Party supported it. Several California billionaires who would have been affected by the proposed tax also contributed substantial amounts to the campaign opposing it. The opposition ran television attack advertisements throughout October. Proposition 40 also faced challenges because its supporters lacked a strong coalition capable of matching the opposition's spending. Instead, they depended on relatively inexpensive strategies, including social media and influencer campaigns, to build public support.

The result was not declared until nearly a week after the election as California continued its gradual mail-ballot counting process. Although the margin narrowed as additional votes were counted, the proposition ultimately failed to secure sufficient support, despite Democrats and left-leaning candidates performing strongly across the state. The defeat of the billionaire tax in a traditionally liberal state is likely to become a reference point in future debates over similar wealth-tax proposals across the country. The issue is expected to feature in the 2028 presidential campaign. Newsom has already expressed interest in a national wealth tax, while opposing the idea of implementing one exclusively in California.

Supporters attributed the initiative's defeat to the significant financial disadvantage faced by their campaign. They also described the outcome as an example of the influence of wealthy individuals over the political process. During a news conference on election night, supporters highlighted the enormous spending by opponents, particularly Sergey Brin, the Google co-founder who contributed more than $100 million to the campaign against the wealth tax. His organization has raised more than $300 million this year, according to the latest campaign finance records.

Dave Regan, head of the health care workers' union that placed the tax proposal on the ballot, said the opposition campaign had created uncertainty among voters. “A lot of confusion and a lot of second-guessing among people who really in their hearts know what the right thing to do is.” Regan also pledged to pursue another billionaire tax proposal in 2028. The union had maintained that taxing billionaires was necessary to compensate for cuts to health care programs signed into law by President Trump last year. According to the Service Employees International Union-United Healthcare Workers West, the absence of the proposed tax revenue would put millions of Californians at risk of losing health insurance and could force hospitals to close.

The proposal received backing from prominent liberal economists and progressive political figures across the country. Senator Bernie Sanders, an independent from Vermont, described Proposition 40 as “the most important ballot item in the country.” However, the initiative divided labor unions and Democratic politicians in California. Newsom and Xavier Becerra, the Democrat who will replace him, opposed the proposal, arguing that it could drive entrepreneurs out of the state. They also questioned whether the short-term revenue generated by a one-time tax would justify the potential long-term damage to California's budget.

The billionaires involved in the opposition campaign largely avoided making public statements about their efforts. Instead, they relied on Democratic-leaning organizations and Newsom to publicly represent the opposition. Representing doctors, California's Planned Parenthood branch, school boards and health clinics, opponents argued that voters had made the right decision by protecting the state's financial stability. They described the proposal as a reckless experiment conducted on our state’s economy.