Californians vote down one-time 5% tax on billionaires

California voters rejected Proposition 40 on Monday, ending a campaign to impose a one-time 5% tax on residents with net worths above $1 billion.

The proposal, known as the California Billionaire Tax Act, sought to tax individuals or couples whose wealth exceeded the threshold as of December 31, 2026. NBC News projected the measure would fail, with 53% of voters opposing it compared to 47% in favor, based on 83% of expected votes.

Supporters, including Sen. Bernie Sanders and Rep. Ro Khanna, argued the state could raise roughly $100 billion from its estimated 250 billionaire residents. They said the funds would offset federal cuts to health care and nutrition assistance programs. In contrast, Gov. Gavin Newsom and gubernatorial candidate Xavier Becerra opposed the measure. They argued a state-only tax would create a competitive disadvantage, allowing wealthy residents to relocate to avoid payment.

The nonpartisan Legislative Analyst's Office warned that while the tax would provide temporary revenue, it could reduce state income by approximately $1 billion annually in the long run. The office noted that the state would also spend tens of millions of dollars each year to administer and enforce the levy. The LAO stated that this could mean less money for the General Fund, which pays for education, health care, and prisons.

Newsom said he supports a national billionaire tax but argued that a California-specific measure would be inefficient. Becerra called the proposal "sketchy," asserting that the state needs a long-term solution for health care funding rather than a temporary boost.

The rejection of Prop. 40 leaves the state without the projected $100 billion in immediate revenue. Democratic leaders must now rely on other funding sources to address federal budget shortfalls while maintaining the state's competitive tax environment.