California Voters Reject 5% Billionaire Wealth Tax

California voters have rejected Proposition 40, a proposed one-time 5 percent tax on billionaires. 52.8 percent of voters opposed the measure, with 47.2 percent supporting it, according to The New York Times.

Proposition 40 would have imposed a 5 percent tax on individuals who lived in the state on January 1, 2026, and whose net worth is over $1 billion as of December 31, 2026. Two competing ballot measures designed to cancel out the wealth tax, Propositions 41 and 42, would restrict California's ability to impose wealth taxes. If either passes with more votes than Proposition 40, it will be nullified. Proposition 42, which prohibits new state taxes on personal property, is expected to pass. 

not only was california's wealth tax rejected by voters, the *concept* of the wealth tax was *banned* by voters. eat shit, communists. pic.twitter.com/1wCP01L01v

— Mike Solana (@micsolana) November 4, 2026

Proposition 40 being voted down is not entirely surprising; polling in the lead-up to the vote suggested support for the wealth tax had declined in recent weeks. An October survey by U.C. Berkeley's Institute of Governmental Studies found 50 percent of likely voters opposed it—up from 48 percent in August—and 42 percent were in favor. A separate October poll by the Public Policy Institute of California found 52 percent opposed and 46 percent in favor.

The campaign attracted substantial spending. Committees opposing the tax raised approximately $130 million, compared with over $33 million raised by supporters.

Proponents of the wealth tax estimated that it would have raised about $100 billion over five years. Ninety percent of this money would have been used to "protect or enhance" California's Medicaid program, which has a checkered history of improper payments. The remaining 10 percent would have gone to a new fund to subsidize public K-12 education and two years of community college.

California's nonpartisan Legislative Analyst's Office offered a more cautious projection of "tens of billions of dollars" over several years. The office also warned that the measure could reduce annual income-tax revenue by up to $1 billion. Indeed, so far, at least seven billionaires, including film director Steven Spielberg, Google co-founders Larry Page and Sergey Brin, Uber co-founder Travis Kalanick, and PayPal co-founder Peter Thiel, have left California.

Stanford economists warn that the permanent loss of income-tax revenue from those departing billionaires, which they say has wiped out nearly 30 percent of California's potential tax base, could outweigh the one-time windfall, leaving California with a net loss of $38.9 billion. In their working paper, published by the National Bureau of Economic Research, Benjamin Jaros and Joshua Rauh created 100,000 simulations, and in 85 percent of them, the tax ultimately costs the state more revenue than it generates.

The proposal has divided Democrats. While Sen. Bernie Sanders (I–Vt.), Rep. Ro Khanna (D–Calif.), as well as the California Democratic Party, have all supported it, Gov. Gavin Newsom opposed the measure. He warned in January that "it actually will reduce investments in education. It will reduce investment in teachers and librarians, childcare. It will reduce investments in firefighting and police," and that a "one-time tax does not solve an ongoing structural challenge."

And while the tax was spearheaded by SEIU United Healthcare Workers West, it was opposed by some industry groups, including the California Medical Association (CMA), California Primary Care Association, and the California School Boards Association. "It relies on an unstable revenue source, provides no clear accountability for how the money would be spent, and does not offer the long-term funding solution that patients and health care professionals need," said CMA President René Bravo.

Wealth taxes are by no means a new idea. In the early 1990s, roughly half of Western European countries imposed them. Since then, all but three have repealed them, citing capital flight, reduced investment, high administrative costs, and disappointing tax revenues.

The result marks a defeat for advocates of higher taxes on the wealthy, who argue that higher taxes and increased state spending improve people's lives. Of course, the evidence is to the contrary. A study of 23 developed countries, published by the Institute of Economic Affairs in London, found no positive correlation between higher taxes and better outcomes in healthcare, education, and other measures of social welfare. The authors argue that "a large state does not guarantee positive social outcomes," and that "real prosperity growth has been higher in countries with low tax rates, making it easier to support good welfare quality."

For now, California voters have rejected a tax that would drive away the wealth and investment that fuels prosperity. But the idea that taxing wealth improves people's lives is not going away—and this probably won't be the last attempt to make the wealthy of the Golden State cough up more cash.

The post California Voters Reject 5% Billionaire Wealth Tax appeared first on Reason Magazine.