The short version
- Proposition 40 proposes a one-time 5% tax on the net worth of approximately 250 California billionaires.
- Supporters argue it will raise $100 billion for healthcare, while opponents fear it will drive wealth out of the state.
- Studies cited by proponents suggest high-tax states do not necessarily see mass departures of wealthy individuals.
California voters are weighing Proposition 40, a measure that would impose a one-time 5% tax on the net worth of roughly 250 billionaires residing in the state. The proposal has become a defining issue in this year’s midterm elections, drawing intense debate from both supporters and opponents. Organizers estimate the tax could generate approximately $100 billion in revenue, with most funds directed toward healthcare to offset federal cuts resulting from recent legislative changes.
Proponents of the measure argue that it addresses inequality without significantly impacting the lifestyles of the ultra-wealthy. George Zimmer, a wealthy Californian who is not a billionaire, wrote that paying such a tax would not materially change his life and suggested those at the very top can afford it even more easily. Six Nobel Prize-winning economists have endorsed the idea, stating it could spark a broader movement to tax high-net-worth individuals globally.
Opponents, however, contend that the tax will trigger an exodus of billionaires from California, damaging the state’s economy and innovation ecosystem. They argue that driving away wealthy residents would create a hole in the tax base and harm what they call the state’s “golden goose.” Despite these concerns, numerous studies have failed to find evidence that wealthy people flee en masse when taxes are raised.
Data from other states supports this skepticism. After Massachusetts and Washington increased taxes on high earners in 2022, both saw an increase in their millionaire populations rather than a decrease. A 2023 study also found that California has had the second-lowest out-migration rate among households earning more than $200,000 since 2011, despite being a relatively high-tax state. This suggests fears of a mass departure may be overstated.
To avoid the tax, billionaires would have needed to move by January 1, 2026. According to available information, only six individuals did so. Between 2019 and 2025, California billionaires’ wealth grew by an average of 15% per year, yet they paid just 0.26% of it in state income taxes. Critics argue that even if all billionaires left, it would take decades under current law for the loss of their tax payments to equal the revenue generated by the proposed measure.
The campaign against Proposition 40 has seen unprecedented spending from billionaire-backed groups, shattering previous records for ballot measure opposition. These efforts highlight the stakes involved in shaping how America taxes its wealthiest citizens. The outcome could set a precedent for other states considering similar measures and influence national discussions on wealth taxation.
Economists remain divided on the potential impact of the tax. While some believe it will fill state coffers without causing significant harm, others worry about unintended consequences for investment and job creation. Two economists who studied the proposal reached wildly different conclusions, reflecting the complexity of predicting economic behavior in response to policy changes.
As voting concludes, attention turns to whether Californians prioritize addressing healthcare funding through wealth taxation or maintaining lower taxes for the ultra-rich. The decision will likely resonate beyond state borders, influencing debates on equity and fiscal responsibility nationwide. Regardless of the outcome, Proposition 40 marks a pivotal moment in efforts to redefine how society approaches wealth distribution.
What remains unclear is how long-term economic trends might shift if the tax passes. Will it encourage innovation elsewhere, or will California retain its status as a hub for entrepreneurship despite higher taxes? Only time will tell whether this bold experiment succeeds or fails.
Sources behind this briefing
Go to the original reporting
- The Guardian US↗I’m a wealthy Californian. The billionaire tax is a win for everyone | George Zimmer
- NPR↗Two economists studied California's billionaire tax. They reached wildly different conclusions
- The New York Times↗Inside the Billionaires’ War Against California’s Proposed Wealth Tax
- Politico↗Billionaires shatter spending record to fight California wealth tax
