A California proposal to tax billionaires has failed, despite backing from prominent progressive politicians.
Proposition 40 would have imposed a one-time tax of 5% on billionaires’ net worth, with some assets excluded from the calculation. The tax would have applied retroactively to anyone living in California on Jan. 1, 2026, a measure intended to prevent people from moving away before it took effect.
Opponents argued the tax could drive wealthy residents to other states and ultimately reduce California’s tax revenue. Supporters, meanwhile, saw it as a potential first step toward broader efforts to tax the ultra-wealthy and fund expanded social programs. Backers included Sen. Bernie Sanders of Vermont and Rep. Ro Khanna of California.
Economist Gabriel Zucman said the measure could help build momentum for wealth taxes across the United States and, eventually, internationally. He estimated it could generate $100 billion, roughly a third of California’s total budget.
Stanford economist and Hoover Institution senior fellow Joshua Rauh reached a very different conclusion. Taking into account the possibility that billionaires would leave the state, he estimated the proposal could cost California $39 billion rather than raise money.
Voters rejected Proposition 40 last Tuesday, with 52.8% voting against it and 47.2% in favor. One estimate put spending by opponents at about $333 million.
Zucman had hoped the measure would pass, though he acknowledged that wealth taxes have struggled to gain traction in other countries.
