As November’s midterm elections approached, the Democratic Socialists of America backed California’s Proposition 40, which would have introduced a one-time 5% tax on billionaires’ wealth in the state.
By Wednesday afternoon, election results indicated the measure was likely to fail. Still, the DSA’s support for it has fueled debate over wealth redistribution and concerns that the tax could prompt wealthy residents to leave California.
Richard Stern, an economics scholar at Advancing American Freedom, said the DSA views taxation as a way to move money from people who create wealth to the government.
The proposal also put the DSA at odds with prominent Democrats, including Gov. Gavin Newsom, who opposed it.
Proposition 40 would have applied a 5% tax to assets including businesses, securities, art, collectibles and intellectual property. Some pensions, real estate and retirement accounts would have been exempt. The measure was written to apply retroactively to billionaires who lived in California on Jan. 1, 2026, an effort to prevent them from avoiding the tax by moving away before it took effect.
California’s DSA chapter circulated a presentation for supporters arguing that the state had enough wealth to fund better schools and health care, but that the money needed to be shifted from wealthy residents to public services.
The group said the tax could help address a projected $100 billion gap in federal funding for Medi-Cal, the state’s health insurance program for low-income residents, older people and people with disabilities. Under the proposal, 90% of the revenue would go toward health care. The other 10% would support education, food assistance and tax administration.
The DSA described the measure as a temporary, progressive tax on the state’s 250 wealthiest residents, who it said collectively hold $2 trillion in assets. The group argued that billionaires’ wealth typically grows by 7% or 8% a year, so a 5% tax would slow that growth rather than leave them poorer.
Stern said that argument overlooks how billionaire wealth is held. In his view, people often imagine billionaires have vast sums of cash, when much of their wealth is tied up in companies and assets such as factories, warehouses, trucks and machinery.
Newsom said the measure would make California less competitive. He cited opposition from firefighters, teachers, Planned Parenthood and many labor groups, and said he believed most Californians also opposed it.
He called the initiative poorly written, arguing that it addressed only one part of the state budget and would provide a one-time source of revenue. He also said the effects of people leaving California were already being felt.
Newsom urged voters to support Proposition 42, a countermeasure intended to block new state taxes on personal property and limit certain retroactive taxes. Election results suggested that measure was on track to pass.
Newsom said he might view a 5% tax differently if it were adopted nationally, describing the debate over a federal policy as distinct from a state-by-state approach. He added that he believed the country needed a new tax bracket.
Stern said a national version would raise similar concerns, though on a larger scale: people could leave the United States by giving up their citizenship and moving abroad.
Asked what set Proposition 40 apart from an ordinary tax increase, Stern pointed to its potential effect on businesses, which he said account for much of many billionaires’ wealth. He argued that the measure would shift control of businesses away from the people who built and ran them and toward politicians. Stern characterized that as socialism.
