California Voters Reject Billionaire Tax After Record-Spending Fight

California voters have turned down Proposition 40, a ballot measure that would have imposed a one-time tax on the state's billionaires, according to projections from NBC News and CBS News. Had it passed, it would have been the first billionaire tax enacted in the United States, NBC reported.

The Guardian described the contest as the most expensive campaign in state history. It also divided Democrats, who are working out their direction ahead of an open presidential race, NBC said.

What Proposition 40 would have done

The measure proposed a 5% tax on the assets of California residents with a net worth above $1.1 billion, with a smaller, phased-in tax for people worth between $1 billion and $1.1 billion, according to NBC. The tax would have applied to anyone living in the state as of Jan. 1, 2026.

The proceeds were earmarked mainly for healthcare. NBC and CBS both reported that 90% of the revenue would go to health programs, and CBS said the rest would go to education, food assistance and administering the tax. CBS added that the measure excluded real estate and certain retirement assets.

What supporters argued

Backers included Sen. Bernie Sanders of Vermont and Rep. Ro Khanna of California, who held several rallies in the state before Election Day, NBC reported. The California Democratic Party and labor unions backed it as well, CBS reported. The healthcare union SEIU-United Healthcare Workers West was the main sponsor.

Supporters said California needs money to offset federal healthcare cuts passed in 2025 and to protect hospitals, clinics and Medi-Cal services, according to CBS. They also argued that billionaires can build wealth through the stock market without paying income tax on those gains until they sell, and that those who gained the most from the state's economy should contribute more.

CBS reported that economists including Daron Acemoglu of the Massachusetts Institute of Technology and Joseph Stiglitz of Columbia University signed a letter in support. It said billionaires' California income tax from 2019 to 2025 equaled only 1.6% of their $1.4 trillion wealth gain. Nvidia CEO Jensen Huang, whose net worth CBS put at about $200 billion, also backed the measure.

What opponents argued

Gov. Gavin Newsom opposed the tax, as did Gov.-elect Xavier Becerra and former Rep. Katie Porter, according to NBC and CBS. The Guardian reported that candidates for governor from both parties were against it. Many large unions, the California Medical Association, the California Teachers Association and Planned Parenthood groups also opposed it, according to the reports.

Critics said the tax would push wealthy residents to leave and shrink future tax revenue. Some progressives who favor taxing the rich also objected because it was a one-time levy that mostly benefited one area, healthcare, NBC reported. Opponents also said the measure gave no guarantees about how the money would be divided among providers, CBS reported. Campaign messaging called it “an everyone tax,” the Guardian said.

CBS reported on a study that said billionaires who have already left, including Sergey Brin, Larry Page and Peter Thiel, removed about $540 billion, or 30%, of the state's billionaire wealth from potential taxation. The study estimated the tax might raise about $30 billion, not the $100 billion proponents projected.

The money behind the campaign

Opponents dominated the airwaves. In late October they were outspending supporters 250 to 1 on ads, according to AdImpact, NBC reported. CBS said the group Building a Better California had raised over $250 million as of Oct. 28. The Guardian reported that billionaires spent nearly $425 million in total, that Brin gave at least $132 million, and that spending topped $2.5 million a day in early October.

Opponents also put two competing measures, Propositions 41 and 42, on the ballot. Either would have blocked the billionaire tax if it won more yes votes than Proposition 40, even if Proposition 40 had passed. Supporters called them poison pills, the Guardian reported.

What it means for California and beyond

For now, no wealth tax takes effect in California, and the state will not receive the healthcare revenue the measure would have generated. CBS said other states and federal policymakers are debating how to tax extreme wealth and fund public services, and that Proposition 40 was seen as a bellwether. The Guardian reported that the result could slow national momentum for taxing the ultra-wealthy.

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Around Prague, based on reporting by NBC News, CBS News, The Guardian