Prop 40 Rejected: California Billionaire Wealth Tax Defeated

California voters on Tuesday rejected Proposition 40, the closely watched billionaire wealth tax that would have imposed a one-time 5% levy on residents worth more than $1 billion as of January 1, 2026. The Associated Press called the race with 52.8% opposed and 47.2% in favor, ending the most expensive ballot-measure campaign in state history and handing a victory to Governor Gavin Newsom, tech billionaires and a bipartisan coalition that warned the measure would drive the state's wealthiest taxpayers out of California.

What was Proposition 40?

Proposition 40 was a combined constitutional amendment and statute that would have created the Billionaire Tax Act. It targeted roughly 250 Californians with net worth above $1 billion, applying a one-time 5% tax to their total wealth, including shares, business holdings and income. The California Legislative Analyst's Office estimated the levy could raise tens of billions of dollars, while sponsor SEIU United Healthcare Workers West projected $100 billion. About 90% of revenue would have funded healthcare programs such as Medi-Cal, with the remainder split between food assistance and public education.

Supporters framed the measure as a direct answer to federal cuts under Trump's One Big Beautiful Bill Act, which analysts said could strip healthcare coverage from about 1.3 million Californians by 2029-30. The union-backed campaign argued that the state's Medi-Cal funding crisis made new revenue urgent.

Why the campaign became the most expensive in California history

The fight set a record. Opponents spent nearly $425 million, according to The Guardian, with Google co-founder Sergey Brin contributing at least $132 million. By early October, the No campaign was spending more than $2.5 million a day. In contrast, the Yes side raised about $33.5 million. Brin and several other billionaires left California before the January 1 residency deadline, a move supporters said showed exactly why the tax was needed but opponents called proof of the wealth tax flight risk.

What supporters and opponents argued

Supporters, including Senator Bernie Sanders and Representative Ro Khanna, said a one-time 5% levy would barely dent billionaire fortunes while protecting vulnerable Californians. Opponents—Governor Newsom, both gubernatorial candidates and Planned Parenthood Affiliates of California—branded the measure an everyone tax, warning it would create a costly new valuation system and drive income-tax revenue out of the state. Newsom rejected a union offer to reduce the tax to 2% and campaigned against Prop 40 while backing Proposition 42, a California tax countermeasure that would bar future taxes on financial assets.

How the vote broke down

The Associated Press confirmed 52.8% opposed and 47.2% in favor. The defeat came despite early polls showing a 19-point lead for the measure in March; by September, UC Berkeley's Institute of Governmental Studies found 45% yes to 42% no. Proposition 42, the countermeasure banning future wealth taxes, led with about 51.6% support.

What the defeat means for healthcare and wealth taxation

The outcome settles one of the most closely watched tests of the US wealth tax debate in the 2026 election cycle. Progressive groups said billionaire spending, not public opinion, defeated the measure and vowed to retry in 2028. Opponents argued the result validates concerns that extreme wealth taxes backfire by encouraging relocation.

For California, the defeat leaves the state without the dedicated healthcare revenue supporters sought, shifting attention to how lawmakers will manage a projected state budget shortfall 2026 amid continued federal uncertainty. Nationally, the result may slow momentum for similar proposals in Washington, New York and other states where state wealth tax proposals are being debated.

FAQ

What was Proposition 40 in California?

Proposition 40 was a 2026 ballot measure that would have imposed a one-time 5% tax on the total wealth of California residents worth more than $1 billion.

Why did California voters reject Prop 40?

Voters rejected it after an opposition campaign funded largely by billionaires, including Sergey Brin, warned the tax would drive wealthy residents and tax revenue out of the state.

How much did opponents spend to defeat Proposition 40?

Opponents spent nearly $425 million, the most expensive ballot-measure campaign in California history, compared with about $33.5 million raised by supporters.

What would Proposition 40 have funded?

The measure would have directed 90% of revenue to healthcare programs such as Medi-Cal, with the rest going to food assistance and public education.

Who supported Proposition 40?

The SEIU United Healthcare Workers West union, Bernie Sanders, Ro Khanna and progressive groups supported the measure.