EXPLAINED | California’s Billionaire Tax Lost. Can Prop 42 Kill the Next One?

California voters rejected Proposition 40, a proposal to tax billionaires’ wealth once and use most of the money for healthcare. The Associated Press called the race on 9 November, six days after the election. About 53% voted no in the count reported by KQED. Google co-founder Sergey Brin gave $102 million to a political committee that helped fight the tax and backed two rival measures. One of them, Proposition 42, was still ahead in the count. It could put a ban on future taxes on financial assets into the state constitution.

What did California voters actually turn down?

Prop 40 would have taxed the net worth of California billionaires and certain trusts once. Net worth is the value of what you own after subtracting qualifying debts. A wealthy founder can own shares worth billions without receiving anything close to that amount in salary or selling shares that year. Prop 40 would have taxed the value of covered assets, including shares, even if their owners kept them. Real estate and most pension and retirement accounts were generally excluded.

Was the 5% on everything above $1 billion?

For people with at least $1.1 billion in taxable net worth, the full rate applied to the entire taxable amount. Someone with $2 billion in covered net assets would have owed $100 million. The proposal phased in the rate between $1 billion and $1.1 billion to avoid a sudden full-rate bill just above the threshold. The tax would have been due in 2027. Taxpayers could choose five annual instalments, with a charge on the unpaid balance.

Why did 1 January matter if the vote was in November?

The proposal used two dates. It asked whether an individual was a California resident on 1 January 2026, then measured the taxable wealth on 31 December 2026. Moving away after the January date could therefore still leave a person liable under the proposal. For a founder whose fortune was largely in shares, a change in the share price before the December valuation date could change the size of the bill.

Why did a healthcare union want to tax stock-market fortunes?

The union, SEIU United Healthcare Workers West, wanted California to replace some of the federal healthcare money it expected to lose under President Donald Trump’s 2025 budget law. California’s low-income health programme, Medi-Cal, is the state’s version of Medicaid. The law changes who qualifies and how people stay enrolled. Prop 40 reserved 90% of the money for public healthcare services. The rest was earmarked for education, food assistance and administering the tax.

The union projected roughly $100 billion in revenue. California’s nonpartisan Legislative Analyst’s Office estimated tens of billions of dollars over several years and said the total was hard to predict. Share prices could change, and taxpayers could take steps to reduce their bills. A one-time levy could pay for services for several years. Those services would still need funding after the money ran out.

Why were Gavin Newsom and Bernie Sanders on opposite sides?

Sanders backed the measure as a way to get more revenue from the ultra-rich. Newsom, California’s Democratic governor, argued that a state-level wealth tax could push wealthy residents and businesses to move, taking future income-tax payments with them. He has supported a national minimum tax for the very wealthy. Planned Parenthood Affiliates of California was among the groups opposing Prop 40, while the state Democratic Party backed it.

The state’s analysts did factor in a possible loss of future income-tax revenue, estimating it at less than $1 billion a year. That was a forecast of how people might respond. The ballot count tells us how Californians voted. It gives no measure of how many would have moved had the levy passed.

What did Brin’s $102 million help fund?

Brin donated the money to Building a Better California, a political committee that helped fund the campaign against Prop 40 and campaigns for Props 41 and 42. State disclosure records show the committee channelled $158.5 million to one major No on 40 committee. That is a contribution from one committee to another, so adding the full amount to the individual donations would count some of the same money twice. The opposition had far more money than the supporters, according to AP. The result also came after a public split among Democrats and healthcare groups.

Why were there three propositions on the same tax fight?

California lets people collect signatures to put proposed laws and constitutional amendments directly before voters. Prop 41 would have added audits for programmes funded by special taxes and brought the revenue under the state spending limit. Prop 42 would bar new taxes on owning financial assets such as stocks and investment accounts, and prohibit certain retroactive taxes.

If two conflicting measures both pass, the conflicting provisions of the one with more yes votes prevail under California’s constitution. That gave the rival proposals a way to challenge Prop 40 even if it won a majority. In the actual count, voters rejected Prop 40 and Prop 41. Prop 42 matters on its own because it would change the rules for future taxes.

How does this compare with India’s old wealth tax?

India took a different route in 2015. In his budget speech, finance minister Arun Jaitley said the wealth tax had brought in ₹1,008 crore in 2013–14 and was costly to collect. The government scrapped it and announced an additional two-percentage-point income-tax surcharge for people with taxable incomes above ₹1 crore. That shifted the extra charge to the tax on annual income. California’s proposal aimed to collect directly from covered fortunes, including assets whose gains had yet to be realised through a sale.

Could Prop 42 block the next billionaire tax?

Yes, if voters approve it, it would put a ban on new state taxes on owning financial assets and other personal property into California’s constitution. A later ballot measure could change that. As of Monday evening in California, Prop 42 had 51.6% support in KQED’s count. California is due to certify the results on 11 December. That will settle whether the state has simply rejected this levy or also changed the rules for the next one.