On Nov. 3, California voters will decide whether the state's wealthiest residents should pay a one-time 5% tax on their net worth. California Prop 40, officially the 2026 Billionaire Tax Act, would apply only to people worth more than $1 billion, an estimated group of about 200 Californians. It would not tax ordinary households.
The real fight is over what happens next. The state's nonpartisan Legislative Analyst's Office says the tax would probably raise tens of billions of dollars over several years, but could also reduce income tax collections if some billionaires leave (LAO analysis). Here is how California Prop 40 works, what each side argues, and the competing measures on the same ballot that could cancel it.
California Prop 40 at a Glance
|
Question |
Answer |
|---|---|
|
Who pays? |
California residents with a net worth over $1 billion as of Jan. 1, 2026 |
|
How much? |
A one-time tax equal to 5% of net worth |
|
When is it due? |
2027; taxpayers who spread payments over five years would pay more |
|
What is excluded? |
Real estate, pensions and retirement accounts generally do not count |
|
Where does the money go? |
90% to health care, mainly Medi-Cal |
|
What kind of measure is it? |
A combined constitutional amendment and state law |
The California Prop 40 ballot label also says the revenue would be exempt from California's constitutional school-funding guarantee and its state spending limit. In plain terms, the money would not automatically trigger extra school funding, and it would not count against the cap on how much the state can spend.
What a Yes or No Vote on California Prop 40 Means
- Yes: The state would collect a one-time tax from billionaires who lived in California on Jan. 1, 2026, with most of the money set aside for health care programs.
- No: No new wealth tax would be created, and current tax rules would stay the same.
The Jan. 1, 2026 residency date matters. Because it is already in the past, supporters argue that billionaires cannot avoid the tax simply by moving out of state now.
Why Supporters Back California Prop 40
The measure was put on the ballot by the Service Employees International Union-United Healthcare Workers West (SEIU-UHW), which reported collecting about 1.6 million signatures, nearly double the number required. The California Democratic Party has endorsed it, and Sen. Bernie Sanders campaigned for it in October.
Supporters make three main arguments:
- Health care funding is under pressure. Backers say the money would help offset federal health care cuts in the One Big Beautiful Bill Act, which the LAO estimates could cost California as much as tens of billions of dollars.
- The tax is narrow. It applies only to billionaires and is designed as a one-time payment, not a permanent new tax.
- The revenue could be large. Proponents project roughly $100 billion over five years, a figure they say already assumes about 10% of the tax is avoided or evaded.
Why Opponents Are Fighting It
The opposition to California Prop 40 is broad and well funded. It includes Gov. Gavin Newsom, both candidates running to replace him, and Google co-founder Sergey Brin, the largest individual donor against the measure. Several groups that are not usually aligned with billionaires also oppose it, including doctors' groups, the California Teachers Association, Planned Parenthood Affiliates of California, the California Primary Care Association and some labor organizations.
Opponents make four main arguments:
- Billionaires will leave. If wealthy residents move away, California would lose the income taxes they pay every year, potentially for good.
- One-time money creates a cliff. A single payment cannot sustainably fund ongoing health care costs.
- Health groups were not consulted. Some health organizations say the measure was not designed with them and does not solve long-term funding problems.
- It could expand later. Opponents claim the measure gives lawmakers room to widen the tax. The measure's authors dispute that, saying the language only allows changes that carry out its stated purpose.
The Big Number Fight: How Much Would It Really Raise?
The estimates vary widely because they rest on different assumptions about how billionaires will respond.
|
Source |
Estimate |
|---|---|
|
Proponents (SEIU-UHW) |
About $100 billion over five years |
|
Legislative Analyst's Office (nonpartisan) |
Tens of billions over several years, plus a possible ongoing income tax loss of less than $1 billion a year |
|
Hoover Institution (conservative-leaning) |
A net loss to the state of nearly $25 billion |
|
Stanford economists Benjamin Jaros and Joshua Rauh |
About $30 billion raised, but a net loss of up to $39 billion if departures are permanent |
The biggest disagreement is whether billionaires who leave would stay gone. The Stanford researchers estimate that departures have already erased nearly 30% of the potential tax base. The tax's architects counter that those estimates assume income tax losses will last indefinitely, which they say is unlikely in response to a one-time tax.
Props 41 and 42: The Measures That Could Cancel It
This is the part many voters miss. Opponents of the billionaire tax qualified two other measures for the same ballot:
- Prop 41 would set new limits on taxes and require audits of special-tax revenue.
- Prop 42 would block new state taxes on personal property, which its backers say would protect ordinary residents' savings.
According to the LAO, if Prop 40 passes but either Prop 41 or Prop 42 receives more yes votes, the billionaire tax would not take effect. That means your votes on 41 and 42 can matter as much to the outcome of California Prop 40 as your vote on 40 itself.
Money and Polls
In the California Prop 40 campaign, opponents hold a large fundraising edge. Committees against Prop 40 reported $99.6 million in contributions through Oct. 6, compared with $32.2 million for supporters, according to Secretary of State filings. Spending on the related measures pushes the total even higher.
Polling has been mixed. Some independent polls have shown the measure narrowly ahead, including one with 52% in favor and 46% opposed, while a more recent Manhattan Institute poll showed the no side leading by 15 points. With large numbers of undecided voters and heavy late spending, treat any single poll with caution.
Questions to Ask Before You Vote
Whatever your view, these questions can help you decide:
- Is a one-time tax a sound way to pay for ongoing health care costs?
- How much weight do you give to the risk of wealthy residents leaving the state?
- How will you vote on Props 41 and 42, and do those votes match your position on Prop 40?
- Does it matter to you that the revenue is exempt from the school-funding guarantee?
- Have you read both sides' arguments in the official voter guide?
What Happens Next
Election Day is Nov. 3. If California Prop 40 passes and is not overridden by Prop 41 or 42, affected taxpayers would owe the tax in 2027. Legal challenges are widely expected either way, so the final outcome may not be settled on election night.
The bottom line: California Prop 40 asks voters to weigh a large, immediate source of health care funding against the risk of losing long-term tax revenue. Supporters see it as a fair emergency response to federal cuts. Opponents see it as a risky experiment that could push wealth and jobs out of California. Both sides agree on one thing: the result will be watched far beyond the state's borders.
For more on this year's elections, see our coverage of where Trump, Obama and Harris are campaigning before Nov. 3.
