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By Lars Hanson
Associate News Editor
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California voters have rejected Proposition 40, which would have made the state the first in the nation to tax billionaires on their net worth. The Associated Press called the race Monday, six days after Election Day.
The defeat capped a fight that split Democrats at the top. California Governor Gavin Newsom, who is considering a run for president in 2028, opposed the tax, warning it would drive the state’s wealthiest residents away. Senator Bernie Sanders and Representative Ro Khanna, two leading progressive lawmakers, championed it.
In the Secretary of State's semi-official count as of 5:14 p.m. Monday, 5,789,026 voters (52.9 percent) had rejected the measure and 5,159,356 (47.1 percent) had supported it.
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Opponents outraised supporters about tenfold. Building a Better California, the committee that led the opposition, raised more than $333 million, and Google co-founder Sergey Brin alone gave more than $100 million.
What Voters Rejected
The measure would have charged billionaires who lived in California on January 1, 2026, a one-time tax of 5 percent of their net worth, due in 2027, according to the nonpartisan Legislative Analyst's Office analysis in the official voter guide. Ninety percent of the money would have gone to health care, and the rest to education, food assistance and the cost of running the tax.
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The sponsoring union, SEIU-United Healthcare Workers West, projected about $100 billion. The analyst's office estimated "tens of billions of dollars spread over several years," along with a "possible ongoing decrease of less than $1 billion per year" in state income tax collected from billionaires.
Economists disagreed sharply about whether the state would come out ahead. A Hoover Institution paper estimated the tax would raise about $30 billion, less than a third of the union's projection, partly because nearly 30 percent of the tax base had already left the state. Counting income tax lost as billionaires leave, it put the measure's net value to the state at negative $38.9 billion.
The measure's drafters argued the opposite. A National Bureau of Economic Research paper, co-written by one of them, estimated the tax could raise about $100 billion. It found that California's billionaires pay about 0.2 percent of their wealth a year in state income tax. That comes to about $3.2 billion, or 2.4 percent of the state's income tax revenue.
Money, Countermeasures and Departures
Building a Better California also backed Propositions 41 and 42. Both were written to conflict with the wealth tax. The analyst's office warned that if either got more "yes" votes than Proposition 40, courts could block the billionaire tax even if a majority approved it.
The countermeasures turned out not to be needed to stop the tax, but Proposition 42 may outlast the fight. It would write a ban on new taxes on financial assets, and on most retroactive taxes, into the state constitution. In the Secretary of State's count as of 5:14 p.m. Monday, it was leading 51.7 percent to 48.3 percent, with 5,612,642 votes in favor and 5,244,738 against. AP had not called the measure. It drew about 450,000 more "yes" votes than the billionaire tax did.
Some of the people the tax targeted were already gone. Brin and fellow Google co-founder Larry Page had started moving away from California before the January 1 residency cutoff.
Meta CEO Mark Zuckerberg took a different route. In October filings, Meta disclosed a deal in which he committed to stay in California for eight years, barring "material unforeseen circumstances." In exchange, he receives non-voting shares he can sell to cover a tax bill without losing control of the company.
A Democratic Split
Sanders endorsed the tax in a December 2025 statement he posted on X: "Our nation will not thrive when so few own so much." Khanna, whose district includes much of Silicon Valley, called Proposition 40 "the most important ballot initiative in America" in an October post on X.
Newsom has instead called for a federal minimum tax on the very wealthy, starting at $100 million in net worth. He called Sanders’ focus on inequality “spot-on” but said “on this issue, we fundamentally disagree.”
Polls showed a close race before Election Day. Newsweek reported in October that a UC Berkeley poll found 45 percent of registered voters supported the measure, 43 percent opposed it and 12 percent were undecided.
What Comes Next
If Proposition 42 passes, any future wealth tax would first require voters to amend the state constitution again.
Labor leaders cast the campaign as a first step. As ballots were being counted, California Federation of Labor Unions President Lorena Gonzalez said it was “showing other states that you can look them in the eye.”
Counting continues, and results are not yet certified.
Newsweek reached out to Building a Better California, SEIU-United Healthcare Workers West and Newsom’s office for comment by email Monday night.
Newsweek’s reporters and editors used Martyn, our AI assistant, to produce this story. Learn more about Martyn here. Contact Newsweek editors on this story: Edward T. Cummins
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