California voters will decide on November 3 whether to approve Proposition 40, a one-time 5% wealth tax on state residents with a net worth exceeding $1 billion. The measure aims to raise revenue for healthcare programs but faces a tight electoral race and significant opposition from state leaders and economists.
A September poll by the University of California Berkeley Institute of Governmental Studies shows 45% of likely voters supporting the tax, while 42% oppose it. This represents a shrinking margin, down from a 19% lead in March. A more recent poll by Mason-Dixon Polling & Research for NBC Universal and Telemundo indicates a 10% advantage for the "Yes" side. Prediction markets, however, show different odds, with Kalshi and Polymarket placing the probability of passage at under 30%.
Partisan divides are stark, with Democrats supporting the measure by more than three to one and Republicans opposing it nearly eight to one. The revenue would primarily offset healthcare cuts resulting from federal legislation signed by President Trump. The state Legislative Analyst's Office estimates the federal cuts could cost California tens of billions of dollars, while proponents claim the wealth tax could raise roughly $100 billion.
Critics argue the tax may drive billionaires out of the state, reducing future income tax collections. Stanford University finance professor Joshua Rauh, writing for the Hoover Institution, estimates the net present value of the tax could be negative $38.9 billion due to this mobility. Incumbent Governor Gavin Newsom opposes the measure, stating in a June post that wealth is movable and will seek lower-tax jurisdictions. He voted "No" on Proposition 40 in October.
Supporters counter that California law likely taxes individuals who moved away if they were residents on January 1, 2026. Darien Shanske, a law professor at UC Davis and co-drafter of the proposal, argued that many recent relocations do not legally exempt individuals from the tax. He also noted that most billionaire assets are public equities, which are easy to value.
Campaign spending highlights the intensity of the battle. Building a Better California, backed by Google co-founder Sergey Brin, has spent approximately $118 million against the measure. The Service Employees International Union, leading the "Yes" campaign, has spent roughly $32 million. Nvidia CEO Jensen Huang has publicly supported the tax, calling it a privilege to pay.
Legal challenges loom if the measure passes. Propositions 41 and 42 appear on the same ballot and could nullify Proposition 40 if they receive more "yes" votes. The state Legislative Analyst's Office notes that courts may find these measures conflict with Proposition 40. Governor Newsom supports Proposition 42, which would bar retroactive taxes on personal assets.
Historical precedent offers mixed signals for temporary taxes. Proposition 30 in 2012 passed with strong support for education funding, but a similar "millionaire tax" proposal in 2022 failed by over 15 percentage points. Shanske maintains that Proposition 40 is a one-time emergency measure, not a permanent increase, and that any future taxation would require a new vote.