California voters reject Prop 40, a measure to tax the wealth of billionaires

WASHINGTON -- California voters have rejected a first-in-the-nation tax on the net worth of billionaires following a contentious ballot fight that generated huge spending by some prominent tech leaders eager to stop their taxes from going up.

The measure's failure is a win for Democratic leaders who opposed it, including Gov. Gavin Newsom, who's deciding whether to run for president in 2028. Critics of the tax, known as Proposition 40, said it would have prompted ultrawealthy taxpayers to leave the state.

The "no" side raised roughly 10 times as much as the "yes" side. Google co-founder Sergey Brin alone dumped more than $100 million into a political action committee working to defeat the measure.

The measure would have imposed a one-time 5% tax on the wealth of Californians whose net worth exceeds $1 billion. Most of the money would have been used to backfill federal funding cuts to healthcare, and 10% would have gone toward education and food-assistance programs. SEIU United Healthcare Workers West, which backed the tax, said it was necessary to replace an estimated $100 billion the state will lose in federal healthcare funding over five years.

Proposition 40 was the nation's biggest test yet on an idea progressives have long championed: raising taxes on the ultra-rich by targeting the main way they make their money — through their investments as opposed to the paychecks they receive from work.

The measure attracted support from liberal leaders beyond the state, including Vermont Sen. Bernie Sanders, who rallied in cities across California in the race's closing weeks to urge voters to pass it.

Billionaires donated millions of dollars to a political action committee, Building a Better California, working to defeat the measure. The committee, which backed other measures on the ballot designed to nullify the tax, raised more than $333 million, nearly a third of which came from Brin.

Brin, along with his fellow Google co-founder Larry Page, was among the billionaires who started cutting ties with the state in anticipation of the possible tax. Another tech mogul, Mark Zuckerberg, said he would remain in the state for eight years and made a deal with Meta to help him pay the tax without losing his ownership stake in the company.

Some traditional Democratic allies, including Planned Parenthood and the California Medical Association, were part of a coalition opposing it. They were concerned about how the tax revenue would be divvied up and about the potential impact on the state's budget if there was a mass exodus of wealthy taxpayers. California's budget relies heavily on the income tax of the state's richest residents.

"Proposition 40 was a reckless experiment conducted on our state's economy with little regard for the harms it would cause," the coalition said in a statement.

Robert Swonger, an auto glass technician living near Sacramento who's politically independent, said before voting concluded Nov. 3 that he planned to vote against it.

"Obviously, I would like billionaires not to have as much money as they do," he said. "But I don't believe taxing them out of existence is going to work."

Progressive politicians, including Sanders and Massachusetts Sen. Elizabeth Warren, have long supported a federal wealth tax. Newsom says a California wealth tax would disadvantage the state, but he supports a national minimum tax on anyone with a net worth above $100 million.

Days before Sanders held rallies in California cities last month, Newsom told reporters that the senator's focus on wealth inequality was "spot-on." But he said that "on this issue, we fundamentally disagree."

Supporters of the California tax started running ads recently in New Hampshire, New Mexico and Virginia, states that will vote early in the Democratic presidential primary in 2028, that criticize Newsom for his opposition to the measure.