California voters are casting ballots on a proposal that could make the state the first in the United States to impose a tax on the net worth of billionaires. Proposition 40 provides for a one-time levy of 5% on the wealth of people with assets exceeding $1 billion who were California residents on January 1, 2026.
If approved, the measure would require the tax to be paid in 2027. Taxpayers would be able to spread the payment over five years, but at an additional cost. Real estate, pension funds and retirement accounts would generally not be included in the tax base.
The money is primarily intended for healthcare
90% of the revenue would have to be used for healthcare services. The remaining funds are earmarked for education, food assistance and the costs of administering the new levy. California's legislative analyst expects the temporary revenue to amount to tens of billions of dollars, but notes that the exact sum is difficult to calculate because of changes in stock prices and possible actions by the affected taxpayers.
Supporters of Proposition 40, including the SEIU United Healthcare Workers West union, say the measure is necessary because of cuts in federal funding. The union estimates that the state could lose $100 billion in healthcare funding over five years.
“It is time to collect these taxes to ensure that our healthcare system remains protected,” says Lorena Gonzalez, president of the California Federation of Labor Unions.Governor warns of an exodus of the wealthy
Democratic Governor Gavin Newsom opposes the state tax. He warns that the wealthiest residents could leave California and take significant tax revenue with them. According to the official analysis, a possible exodus could reduce income tax revenues by less than $1 billion annually.
Opponents have raised approximately ten times more money than supporters of the measure. Among the main donors are technology entrepreneurs and venture capital investors. The Building a Better California committee has raised more than $333 million, with around 30% of the sum provided by Google co-founder Sergey Brin.
The vote could be nullified
A Public Policy Institute of California poll from mid-October shows that 52% of likely voters oppose Proposition 40, while 46% support it. At the beginning of September, the ratio was the reverse.
Even if the measure receives a majority, it may not take effect. Proposition 41 and Proposition 42, backed by opponents of the tax, could block it if they receive more “yes” votes than Proposition 40. One would ban new taxes on financial assets and personal property, excluding real estate, while the other is related to restrictions on the taxation of personal assets and savings.
Sources: bta.bg, apnews.com