Proposition 40 would have levied a one-time 5% tax on California residents with a net worth of $1 billion, excluding real estate and certain retirement assets. Proponents of the measure said it is expected to generate $100 billion over five years, with 90% going toward healthcare programs and the other 10% for education, food assistance, and administration of the tax.
The vote was framed by supporters as part of a broader struggle over economic inequality and the political influence of the billionaire class.
The measure created a divide among politicians and organizations that ordinarily align with Democratic priorities. While it was supported by the California Democratic Party and labor unions including SEIU Healthcare Workers West, the principal sponsor of the measure, it was opposed by Gov. Gavin Newsom, former Orange County Rep. Katie Porter, and major healthcare and professional organizations such as the California Medical Association and California Teachers Association.
Newsom has also expressed a preference for taxing billionaires at the federal level and says a California-only wealth tax would be limited to funding healthcare and not other needs. Opponents of the measure also claim that the initiative does not provide guarantees about how the money would be allocated among providers and services.
Wealthy opponents contributed tens of millions of dollars to defeat Prop. 40, with most of the money going to the group Building a Better California, which has raised over $250 million in the campaign against the billionaire tax as of Oct. 28. The funding also went toward supporting two competing measures, Propositions 41 and 42, which would place limits on special taxes and could prevent the billionaire tax from taking effect if either receives more votes than Prop. 40.
Other economists, including Nobel Prize winners Daron Acemoglu of the Massachusetts Institute of Technology and Joseph Stiglitz of Columbia University, supported the measure, saying that California has attracted more venture funding since Prop. 40 was introduced. An open letter from the economists noted that between 2019 and 2025, the California income tax paid by billionaires was "only 1.6% of their $1.4 trillion wealth gain, much less than what ordinary Californians pay on their paychecks."
"I don't mind paying taxes; the more you make, the more taxes you pay, so I'm okay with that," Huang told CBS News. "I don't like tax dollars wasted. But I also support all that this country represents."
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