California voters reject billionaire wealth tax 53-47, ending most expensive tax ballot fight in state history

California will not become the first state in the country to levy a wealth tax on its richest residents — at least not yet. Voters rejected Proposition 40 by 52.8% to 47.2%, the Associated Press confirmed Monday, ending a campaign that shattered spending records for any tax-related ballot measure in California history and laid bare a fracture inside the Democratic Party that its leaders will be forced to reckon with heading into an open 2028 presidential race.

The measure would have imposed a one-time 5% tax on California residents with a net worth above $1 billion — excluding real estate and certain retirement assets — and was projected by its sponsors to raise $100 billion over five years, with 90% earmarked for healthcare and the remainder split among education, food assistance, and administration. Supporters framed it as an emergency response to federal healthcare cuts enacted in 2025 under H.R. 1, the 'One Big Beautiful Bill Act,' which they say threatens to remove roughly 2 million Californians from health insurance.

The 'No' side had a staggering financial advantage. Billionaires and allied organizations poured $378.4 million into defeating Prop. 40, according to CalMatters — more than eleven times the $33.5 million raised by supporters. In late October, opponents were outspending the 'Yes' campaign 250 to 1 on advertising, according to the ad-tracking firm AdImpact, per NBC News. Google co-founder Sergey Brin alone donated $102 million to Building a Better California, a political committee he founded to oppose the tax, after publicly moving out of state. Fellow Google co-founder Larry Page, PayPal and Palantir co-founder Peter Thiel, venture capitalists John Doerr and Vinod Khosla, and Stripe CEO Patrick Collison were also among the wealthy opponents, according to CBS News. More than $400 million was spent across the three intertwined ballot measures — Propositions 40, 41, and 42 — with more than 90% of that total spent opposing the billionaire tax, according to fundraising disclosures filed with California's secretary of state, per the Los Angeles Times.

But money alone did not defeat Prop. 40. The measure was undone as much by its opponents within the Democratic coalition as by the billionaires it targeted. Gov. Gavin Newsom — a likely 2028 presidential contender — became one of its earliest and most prominent opponents, reportedly attempting through private negotiations to keep it off the ballot entirely, according to CalMatters. He ultimately endorsed Proposition 42, a billionaire-backed counter-measure designed to ban all wealth taxes in California. Governor-elect Xavier Becerra also opposed Prop. 40, as did the California Teachers Association, the California Medical Association, Planned Parenthood Affiliates of California, and the California School Boards Association — organizations that typically align with labor and progressive priorities.

Proposition 40 risked California's economic competitiveness and fiscal stability, as well as the revenue we rely on to fund our top priorities — from education and healthcare to public safety and infrastructure.— No on Prop. 40 coalition statement

Newsom and other Democratic opponents argued that a California-only wealth tax would push the state's wealthiest residents to leave, shrinking the broader income tax base that funds schools, infrastructure, and public safety — not just healthcare. Newsom has said he prefers taxing billionaires at the federal level. A Stanford University study cited by CBS News found that billionaires who have already departed California — including Brin, Page, and Thiel — have removed roughly $540 billion, or 30%, of the state's billionaire wealth from potential taxation, and concluded that Prop. 40 might generate only about $30 billion rather than the $100 billion its sponsors projected.

On the other side of the Democratic divide stood the California Democratic Party itself, the California Federation of Labor Unions, and the Service Employees International Union-United Healthcare Workers West — the principal sponsor of the measure — along with national progressive figures including Sen. Bernie Sanders and Rep. Ro Khanna, both of whom held rallies in the state ahead of Election Day. Nvidia CEO Jensen Huang, whose estimated net worth is approximately $200 billion, was among the rare billionaires who publicly backed the measure.

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.— Jensen Huang, Nvidia CEO

Other economists, including Nobel Prize winners Daron Acemoglu of MIT and Joseph Stiglitz of Columbia University, signed an open letter supporting the measure. The letter noted that between 2019 and 2025, California income tax paid by billionaires was 'only 1.6% of their $1.4 trillion wealth gain, much less than what ordinary Californians pay on their paychecks,' according to CBS News. The economists also pointed to data showing California attracted more venture funding after Prop. 40 was introduced.

The geographic split in the results reflected the state's political geography: Prop. 40 found its strongest support in Los Angeles and San Francisco — home to the largest concentration of the state's roughly 200 billionaires — while Orange County voted no by a wide margin, according to the Los Angeles Times.

Opponents also placed two counter-measures on the ballot. Proposition 41 would have required the state auditor to review new special tax measures and counted any new tax toward a voter-approved spending limit. Proposition 42 would have banned new taxes on assets, including investment accounts and property, and restricted retroactive tax increases. Both were structured so that either would take effect by receiving just one more vote than Prop. 40, even if Prop. 40 passed. As of Monday evening, Proposition 42 was leading 51.6% to 48.4%, according to CalMatters — a result that could complicate future attempts to revive a wealth tax.

The billionaires may have bought themselves a temporary victory at the ballot box, but they have not bought themselves an end to this debate, and this is only round one.— Suzanne Jimenez, Prop. 40 sponsor and chief of staff, SEIU-UHW

SEIU-UHW president Dave Regan said the union's plan, if California's Legislature fails to find a solution for healthcare funding, is to return to the ballot in 2028. But Proposition 42's apparent passage could create a legal obstacle to that path. Lorena Gonzalez, president of the California Federation of Labor Unions, said the defeat places greater pressure on state and federal lawmakers to backfill Medicaid cuts — a task that, given California's volatile budget outlook, appears unlikely to be resolved easily, according to the Los Angeles Times.

Proposition 40 was a reckless experiment conducted on our state's economy with little regard for the harms it would cause.— Evan Westrop, campaign strategist, No on Prop. 40

John Matsusaka, an economist and direct democracy expert at USC, told CalMatters ahead of the election that Democratic infighting likely contributed to the outcome. Research shows that money cannot simply buy votes on core issues, he said, but it can exploit uncertainty — and when a coalition is divided against itself, voters start to hear the counterarguments.

The debate is not confined to California. Sanders and Khanna have introduced the 'Make Billionaires Pay Their Fair Share Act,' which would impose a federal 5% tax on American billionaires. Despite Democrats winning control of the House and Senate, the legislation is expected to face constitutional challenges if it advances, according to the Los Angeles Times. How California's voters answered the question — and the scale of the Democratic split it revealed — will shape that national conversation.

Why it matters — California's rejection of the first-ever U.S. billionaire wealth tax — and the Democratic split it exposed — will shape how politicians nationally approach taxing extreme wealth ahead of the 2028 presidential race.

Sources differ on Projected revenue from Prop. 40: $100 billion over five years (cbsnews.com / calmatters.org (SEIU-UHW sponsors)) vs ~$30 billion (cbsnews.com (Stanford University study))

Reported by cbsnews.com, nbcnews.com, wsj.com, latimes.com, calmatters.org