California Voters Reject Billionaire Wealth Tax in Major Defeat for Proposition 40

California voters have decisively rejected Proposition 40, a proposed one-time 5% tax on residents with a net worth of $1 billion or more, CBS News projects. The measure, which aimed to raise $100 billion over five years to support healthcare and other public services, faced fierce opposition and a record-breaking spending battle across the state.

Details and Goals of Proposition 40

Proposition 40 was designed to tax California’s wealthiest individuals by imposing a one-time 5% levy on billionaires’ net worth, excluding real estate and certain retirement assets. Its proponents projected that the tax would generate $100 billion over five years, with 90% of those funds dedicated to healthcare programs and the remaining 10% allocated to education, food assistance, and tax administration.

Supporters framed the tax as a necessary response to federal healthcare cuts implemented under the 2025 “One Big Beautiful Bill Act” (H.R. 1), aiming to protect hospitals, emergency rooms, clinics, and Medi-Cal services. They argued that billionaires often accumulate substantial untaxed wealth from stock market gains and business valuations and that those benefiting most from California’s economy should contribute more to public services.

Political and Organizational Divides

The measure exposed rifts among traditionally aligned Democratic groups and politicians. While the California Democratic Party and labor unions such as SEIU Healthcare Workers West supported the initiative, Gov. Gavin Newsom and former Orange County Rep. Katie Porter opposed it. Major professional organizations, including the California Medical Association and California Teachers Association, also stood against the tax.

Newsom and Porter, despite backing higher taxes on corporations and wealthy individuals, expressed concerns that the tax would drive wealthy residents out of California, ultimately harming the state’s fiscal health. Newsom also preferred a federal approach to taxing billionaires and criticized Proposition 40’s limited focus on funding healthcare, noting the lack of guarantees on how the funds would be allocated among providers and services.

Opposition Fueled by Billionaire Coalition and Massive Spending

A coalition of billionaires, including Google co-founders Sergey Brin and Larry Page, venture capitalist John Doerr, PayPal and Palantir co-founder Peter Thiel, venture capitalist Vinod Khosla, and Stripe CEO Patrick Collison, organized to defeat the measure. These opponents contributed tens of millions of dollars, channeling the majority of funds to the group Building a Better California, which raised over $250 million against the tax as of Oct. 28.

The opposition campaign also backed two competing measures, Propositions 41 and 42, which would limit special taxes and could block the billionaire tax if either outperformed Proposition 40 in votes.

Economic Studies and Support from Prominent Economists

A Stanford University study found that billionaires who had already left California, including Brin, Page, and Thiel, had moved approximately $540 billion—about 30% of the state’s billionaire wealth—out of reach of the proposed tax. The study further suggested that Proposition 40 might raise only around $30 billion, far less than the $100 billion estimated by its supporters.

However, Nobel Prize-winning economists such as Daron Acemoglu of MIT and Joseph Stiglitz of Columbia University backed the measure. They noted in an open letter that between 2019 and 2025, billionaires paid only 1.6% of their $1.4 trillion wealth gain in California income taxes—significantly less than what ordinary Californians pay on their paychecks. They also pointed to increased venture funding in California following the introduction of Proposition 40.

Billionaire Support and Public Reaction

One notable billionaire supporter was Nvidia CEO Jensen Huang, whose net worth is estimated at about $200 billion. Huang told CBS News, “I don’t mind paying taxes; the more you make, the more taxes you pay, so I’m okay with that. I don’t like tax dollars wasted. But I also support all that this country represents.”

Despite the passionate backing from some quarters, California voters ultimately decided against the wealth tax, marking a significant moment in the ongoing national debate over how to tax extreme wealth and fund public services.