California's Prop 40 Would Hit ~200 Billionaires With a One-Time 5% Wealth Tax

California voters are deciding whether to impose a one-time 5% tax on the net worth of the state's roughly 200 billionaires — a measure that has split Democrats, drawn more than $200 million in opposition spending, and set up a legal and logistical fight the state has never attempted before.

Proposition 40, on the November 3, 2026 ballot, would require any individual or trust that was a California resident on January 1, 2026, and has a worldwide net worth of at least $1 billion as of December 31, 2026, to pay 5% of that wealth to the state. The tax bill would come due in 2027, though it can be spread over five annual installments — at an added 7.5% annual charge on the unpaid balance. A simple majority vote is required to pass.

The residency cutoff is one of the measure's most unusual features. California normally evaluates residency over months; Prop 40 locks it to a single day that had already passed before voters went to the polls. That means billionaires who relocated after January 1, 2026 cannot use a move to escape the tax — though the state's Franchise Tax Board would have to prove residency case by case, a process that, according to Baker Tilly tax attorney Chris Parker, could stretch across years. The board would have 10 years instead of the usual four to assess 2026 returns, according to Baker Tilly's reading of the measure.

Several prominent billionaires — including Google co-founder Larry Page, Sergey Brin, and Peter Thiel — were reported by Fortune in March 2026 to have left California in late 2025, before the residency cutoff date.

What counts as taxable wealth is broad by design. Stocks, investment accounts, business interests, art collections, wine vaults, and cars are all included. Directly held real estate is excluded, as are most retirement accounts — though the exclusion for Roth-type accounts is capped at $10 million. Property kept outside California for at least 270 days in 2026 is also excluded, per Baker Tilly's reading. Gifts and trusts established after October 15, 2025 are largely added back, closing off a last-minute transfer strategy.

Public stock is straightforward to value — the share price on December 31, 2026. Private companies are not. Prop 40 sets a default formula: book value plus 7.5 times the average book profit of the last three years, multiplied by the owner's share, with losses counted as zero and most valuation discounts banned. Owners can substitute a certified appraisal, but the appraiser personally risks a penalty of up to 4% of any understatement.

Ninety percent of the revenue must go to healthcare services — primarily to offset cuts made by federal legislation — with the remaining 10% earmarked for food assistance and education programs, according to the Legislative Analyst's Office.

How much money the tax would actually generate is genuinely contested. The Legislative Analyst's Office, the legislature's nonpartisan fiscal advisor, estimates 'tens of billions of dollars' but declines to give a single figure. Supporters cite roughly $100 billion. Stanford economists Jaros and Rauh estimate approximately $30 billion after accounting for avoidance behavior. The gap reflects uncertainty about how many billionaires would restructure assets, dispute valuations, or be found to have legitimately left before the January 1 cutoff.

Implementing the tax would require California to build an entirely new valuation and enforcement infrastructure within six months of passage. The state's Franchise Tax Board currently does not appraise personal property. UCLA tax law professor Kirk Stark said the effort is feasible but would require a major investment of resources and is certain to invite litigation. USC tax policy professor Ariel Jurow Kleiman is less concerned, arguing that stocks — which make up a large share of billionaire wealth — are easily valued, and that established IRS methods exist for appraising art and jewelry.

There are commonsense methods like looking at comparable assets or looking to available markets to see how comps are valued. We wouldn't be asking people to reinvent the wheel here.— Ariel Jurow Kleiman, tax policy professor, University of Southern California

It can be done. But it's going to take a huge investment of resources to actually pull it off.— Kirk Stark, tax law professor, UCLA

The proposition has divided California's political establishment. Progressive figures including Sen. Bernie Sanders and Rep. Ro Khanna are among its most vocal supporters. Gov. Gavin Newsom is its most prominent Democratic opponent, arguing that billionaires can and will leave the state to avoid the tax, ultimately costing California more in lost income tax revenue than the one-time levy would raise. The Legislative Analyst's Office estimates that income tax losses from departing billionaires would amount to under $1 billion a year.

Prop 40 is the most important ballot initiative in America.— Ro Khanna, U.S. Representative

The Governor supports a national tax on billionaires and is proud to stand with teachers, firefighters, reproductive health clinics, and others in opposing this poorly written state measure that will harm California.— Spokesperson for Gov. Gavin Newsom

The opposition campaign has been funded heavily by the billionaires the measure would target. Google co-founder Sergey Brin has contributed $102 million to the effort, which includes backing two counter-measures — Propositions 41 and 42 — that could nullify Prop 40 even if it passes. In total, opponents have raised more than $205 million, according to campaign finance records cited by calmatters.org. The Yes on 40 campaign has raised more than $30 million, the vast majority from SEIU-UHW West, according to abcnews.com.

Props 41 and 42 are the structural threat to Prop 40's survival. Prop 41 would require new taxes to comply with the state spending limit; Prop 42 would ban new taxes on personal financial assets and prohibit most retroactive taxes. If either counter-measure receives more yes votes than Prop 40, it cancels out the billionaire tax.

Why it matters — Prop 40 would be the first state-level wealth tax of its kind in the US, and its outcome — including whether rival measures kill it even if it passes — will shape how other states think about taxing billionaire wealth to fund public services.

Sources differ on Total revenue Prop 40 would generate: Tens of billions of dollars (no single figure given) (abcnews.com / LAO) vs Approximately $100 billion (supporters' claim) (tensorust.com) vs Approximately $30 billion after avoidance (Stanford economists Jaros and Rauh) (tensorust.com) vs $82–$118 billion paper base before avoidance (tensorust.com)

Reported by abcnews.com, tensorust.com, voterguide.sos.ca.gov, spur.org, calmatters.org, sfchronicle.com, kqed.org