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California's proposed one-time billionaire tax failed to pass, marking a setback for labor unions and supporters who wanted to fund public healthcare, education, and other social programs. The proposal, reported by the Associated Press on November 9, also exposed divisions within the state's technology industry over taxing extreme wealth.
The measure triggered an expensive political battle, with prominent technology billionaires and business leaders opposing the proposal. California Governor Gavin Newsom also opposed the tax.
Proposition 40 would levy a one-time 5 percent tax on the wealth of Californian citizens whose wealth exceeds USD 1 billion. The provision would apply to people who lived in the state as of January 1, 2026.
California has a little over 200 billionaires, and their total wealth is estimated at USD 2 trillion. Proponents of the tax believe it will bring substantial benefits to the population.
Revenue is estimated at up to USD 100 billion over five years. Part of the revenue will support California's Medicaid program, Medi-Cal, and other programs.
The criticism came from people who feared the tax could push rich people in California to move to other states like Florida and Texas, which could affect business investment and future tax revenue.
Nic Carter, a general partner at crypto venture capital firm Castle Island Ventures, said states like Florida and Texas would gain an edge if wealthy people moved from California.
He also worried that startups might sell shares to pay off the tax bill, which could affect venture capital investments.
Another entrepreneur, Jesse Tinsley, said the move will affect startup founders' ability to retain control of the business.
But Emmanuel Saez, an economics professor at the University of California, Berkeley, was not concerned about founders losing control.
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A campaign opposed Proposition 40 and received considerably more funding than its supporters. The Associated Press reports that opponents raised about 10 times as much money as proponents.
Opponents of Proposition 40 included wealthy technology billionaires like Google founder Sergey Brin.
Despite the defeat, supporters have indicated that the billionaire tax could return to California's ballot in 2028.
The outcome leaves the debate over taxing extreme wealth unresolved, particularly as California continues to grapple with healthcare funding, income inequality and the economic influence of its technology industry.