California Voters Reject Billionaire Wealth Tax in Prop. 40, Splitting Democratic Allies

California voters have rejected Proposition 40, a tax on the state's wealthiest residents, according to a CBS News projection. The campaign that led up to the vote split longtime political allies and set a spending record for a tax-related measure in the state.

The measure would have imposed a tax on California residents with a net worth of $1 billion or more, excluding real estate and certain retirement assets. Proponents said it would raise $100 billion over five years. Under their plan, 90% would go to healthcare programs, and the remaining 10% would cover education, food assistance and administration of the tax. The vote was widely treated as a bellwether, arriving while other states and federal policymakers debate how to tax extreme wealth and pay for public services.

Supporters framed the measure as part of a larger fight over economic inequality and the political influence of billionaires. They pointed to federal healthcare cuts enacted in 2025 under H.R. 1, known as the One Big Beautiful Bill Act, and said the money was needed to protect hospitals, emergency rooms, clinics and Medi-Cal. They also argued that billionaires can build large fortunes through stock and business valuations without paying income tax on those gains until they are realized, and that those who have gained most from California's economy should give more back.

The measure divided groups that usually line up together. The California Democratic Party and labor unions backed it, including SEIU Healthcare Workers West, its principal sponsor. Gov. Gavin Newsom and former Orange County Rep. Katie Porter opposed it, as did major professional and healthcare organizations including the California Medical Association and the California Teachers Association. Newsom and Porter have both supported higher taxes on corporations and wealthy individuals. Their objection was that Prop. 40 would push wealthy residents out of California and weaken its long-term fiscal position by reducing tax revenue. Newsom has also favored taxing billionaires at the federal level, and he said a California-only wealth tax would be limited to healthcare rather than other needs. Opponents added that the initiative offers no guarantees about how the money would be divided among providers and services.

A coalition of billionaires organized against it, including Google co-founders Sergey Brin and Larry Page, venture capitalists John Doerr and Vinod Khosla, PayPal and Palantir co-founder Peter Thiel, and Stripe CEO Patrick Collison. Wealthy opponents gave tens of millions of dollars. Most of it went to Building a Better California, which had raised more than $250 million against the tax as of Oct. 28. The money also backed two competing measures, Propositions 41 and 42, which would limit special taxes and could keep the billionaire tax from taking effect if either gets more votes than Prop. 40.

Economists disagreed about the stakes. One study found that billionaires who have already left the state, including Brin, Page and Thiel, have taken about $540 billion, or 30%, of California's billionaire wealth out of reach of the tax. It concluded Prop. 40 might raise only about $30 billion, not the $100 billion proponents projected. Other economists, among them Nobel laureates Daron Acemoglu of MIT and Joseph Stiglitz of Columbia, backed the measure. They said California has drawn more venture funding since Prop. 40 was introduced. In an open letter, they noted that between 2019 and 2025, billionaires paid California income tax equal to only 1.6% of their $1.4 trillion in wealth gains, far less than ordinary Californians pay on their paychecks.

One California billionaire supported the measure: Nvidia CEO Jensen Huang, whose net worth is estimated at about $200 billion. He said he doesn't mind paying taxes, that the more you make the more you pay, and that he dislikes wasted tax dollars but supports what the country represents.

With Prop. 40 projected to fail, attention turns to how Propositions 41 and 42 fared, and to whether other states and Washington take up the debate over taxing extreme wealth.