California’s one-time wealth levy looks headed for defeat in early returns, and a rival pair of measures could erase it even if it survives.
SACRAMENTO, California (Surf Revolt) – California voters spent the week after Election Day watching the country’s first statewide wealth tax slide toward defeat. Proposition 40, a one-time 5 percent levy on the net worth of the state’s billionaires, trailed in early returns, while two competing measures written to cancel it were doing better. The count is not final, and the outcome of the three-way collision on the ballot matters well beyond the roughly 200 people it targets.
What Proposition 40 would have done
According to CalMatters’ election-night explainer, the measure would charge a single 5 percent tax on the net worth of billionaires who lived in California on January 1, 2026, measured as of December 31, 2026. Stocks, bonds, business holdings and other valuable personal property would all count. Payment could come as a lump sum or in installments over five years.
The revenue forecast is where the sales pitch and the arithmetic part ways. The sponsor, SEIU United Healthcare Workers West, projected about $100 billion over five years for health care and education. The nonpartisan Legislative Analyst’s Office said only “tens of billions of dollars” over several years. A Hoover Institution study cited by the San Francisco Standard put collections near $30 billion, against roughly $39 billion in lost income-tax revenue over time if billionaires leave.
That last number deserves attention. Whatever one thinks of the study, it describes the central problem with taxing wealth in a state that already leans hard on its richest taxpayers: the base can move, and the income stream it throws off moves with it.
The ballot trap: how 41 and 42 fit in
The same ballot carried two measures aimed squarely at Proposition 40. By CalMatters’ account, Proposition 41 bars taxes that sidestep the 1979 state spending limit and requires audits of future tax proposals before they reach voters. Proposition 42 bars taxes on financial assets, private businesses, pensions and other forms of wealth, and prohibits retroactive taxes. Under the state constitution, when measures conflict, the one with the most yes votes prevails and the others fall.
So the tax could win a majority and still lose. A Public Policy Institute of California poll of 1,086 likely voters, fielded October 16 to 22, found Proposition 40 at 46 percent yes and 52 percent no, down from 52 percent support in September. The same survey had Proposition 42 at 51 percent support and Proposition 41 at 48 to 49. The institute’s survey director said the slide was concentrated among Democrats and independents.
- CalMatters, citing the Associated Press: with 60 percent of votes counted, Proposition 40 was losing, with 55.6 percent voting no.
- Same report: Proposition 42 led with 54.3 percent approval, and 52 percent of voters rejected Proposition 41.
- The Associated Press said almost 6 million votes were still uncounted on Wednesday, so the race was too early to call.
Where the coast voted
The Associated Press reported that opponents held sizable leads in San Diego and Orange counties, smaller leads along the Central Coast and in the Bay Area, with large no margins inland and in the Central Valley. Supporters narrowly led in Los Angeles County and on the northern coast. The surf towns of Orange County and San Diego, in other words, did not look like fertile ground for a new tax on capital, and the people who own their small businesses and pay California’s high housing costs have good reason to ask who is next once the principle is established.
The money and the politics
The campaign was lopsided in dollars. CalMatters reported that billionaires and business interests spent $316.7 million to stop the tax and promote the two rival measures, including $102 million from Google co-founder Sergey Brin to the committee he founded. The Associated Press put the committee’s total at more than $333 million and said the no side raised roughly ten times what the yes side did.
Governor Gavin Newsom opposed the tax and endorsed Proposition 42, arguing with Planned Parenthood of California and the California Teachers Association that a one-time levy would not fix the state’s finances and would push wealthy residents out. He has instead called for a national minimum tax on people with a net worth above $100 million. The California Democratic Party and the California Federation of Labor Unions backed the tax. SEIU-UHW president Dave Regan said the union plans to try again in 2028.
The fairest statement of the supporters’ case is this: federal cuts to health programs are real, the money would have been collected once, and billionaires can afford it. Those are serious points. They do not answer the question of whether a state can write a net-worth tax into its constitutional order without inviting the capital it targets to relocate, or without turning a one-time charge into a precedent for the next fiscal crunch.
The libertarian read
A wealth tax is a tax on assets that have not been sold, valued by an assessor, owed regardless of whether the owner holds any cash. It differs in kind from an income or sales tax, and the difference is the reason voters seem to be wary of it, even in a state with a deep tradition of taxing high earners. A columnist at Reason argued back in May that the tax could make California poorer, and the slide in the polls shows how quickly support can erode once the details get scrutiny.
The deeper lesson is about incentives. California collects an outsized share of its income tax from a thin slice of earners, which makes the budget exposed to a handful of decisions made in a handful of boardrooms and family offices. Making that base the target of a new levy, rather than broadening the economy that produces it, is the wrong direction. The surfer’s instinct applies: when the lineup gets crowded and the rules get arbitrary, people paddle to another break. Capital behaves the same way.
Proposition 42, if it prevails, would block new state taxes on personal property such as investments, which would also protect middle-class savers and small owners, not only the ultra-rich. That is a decent outcome for a coastal state where homeowners already pay heavily for insurance, fuel and permits.
What to watch as the count finishes
Three things remain open. First, the margins: if Proposition 42 beats Proposition 40 on yes votes, the tax is void regardless of the Proposition 40 result. Second, the budget: lawmakers still face the federal health-care cuts the union cited, and the argument will return in the next budget cycle. Third, the 2028 promise, which means this fight is a round, not a finish.
Bohiney Magazine covers California and the rest of America from the comedy side, and its writers will certainly have fun with a campaign in which billionaires and unions each spent heavily to explain who really cares about the poor.
SOURCE: https://bohiney.com/