California voters have rejected a proposed billionaire wealth tax, in a result projected after a campaign that divided Democratic allies and attracted unprecedented spending for a tax measure in the state.
Proposition 40 would have imposed a one-off 5% levy on California residents with a net worth of at least $1 billion. Real estate and certain retirement assets would have been excluded.
Supporters said the measure could raise $100 billion over five years, with 90% allocated to healthcare and the remainder divided between education, food assistance and administering the tax.
California billionaire wealth tax divides Democrats
The proposal was presented as a way to protect hospitals, emergency rooms, clinics and Medi-Cal services from healthcare cuts introduced federally in 2025 under the legislation known as the One Big Beautiful Bill Act.
Its backers also argued that billionaires can see their wealth rise through stock-market gains and increased business valuations without paying income tax until those gains are realised. They said residents who had benefited most from California’s strong economy should contribute more towards public services.
But the proposal split politicians and organisations that have traditionally supported similar Democratic priorities. It received backing from the California Democratic Party and labour unions including SEIU Healthcare Workers West, which was the measure’s principal sponsor.
Governor Gavin Newsom and former Orange County representative Katie Porter opposed it, despite supporting higher taxes on corporations and wealthy individuals. They argued that the tax could encourage wealthy residents to leave California, weakening the state’s finances and reducing future tax revenue.
Mr Newsom has said he would prefer billionaires to be taxed at federal level. Opponents also argued that Proposition 40 offered limited control over how the money would be distributed among healthcare providers and services.
A group of wealthy technology and investment figures campaigned against the measure, 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 chief executive Patrick Collison.
The opposition raised more than $250 million by October 28 through Building a Better California, with tens of millions contributed by wealthy opponents. Some of the money also supported Propositions 41 and 42, which would limit special taxes and could prevent the billionaire tax from taking effect if either attracted more votes than Proposition 40.
A Stanford University study said billionaires who had already left California, including Mr Brin, Mr Page and Mr Thiel, had removed about $540 billion of wealth from potential taxation. It estimated that Proposition 40 might raise roughly $30 billion, rather than the $100 billion forecast by supporters.
Other economists backed the measure, including Nobel laureates Daron Acemoglu of the Massachusetts Institute of Technology and Joseph Stiglitz of Columbia University. An open letter from economists said billionaires’ California income tax payments between 2019 and 2025 amounted to 1.6% of their $1.4 trillion increase in wealth over the period.
Nvidia chief executive Jensen Huang, whose estimated net worth is about $200 billion, was among the wealthy Californians supporting Proposition 40.
“I don’t mind paying taxes; the more you make, the more taxes you pay, so I’m okay with that,” Mr Huang said. “I don’t like tax dollars wasted. But I also support all that this country represents.”
