California voters reject Proposition 40 billionaire tax

California voters rejected Proposition 40, a proposed one-time tax on billionaires, after the election the previous week, according to Hindustan Times, which carried reporting credited to The Wall Street Journal. The Associated Press called the race on Monday, Nov. 9, while the measure was trailing, Hindustan Times reported.

The defeat followed a costly campaign over whether to tax the wealth of California residents with billion-dollar fortunes to fund healthcare and other services. The proposal divided Democrats and drew opposition from technology executives, billionaires, unions and healthcare groups.

• NBC News described a one-time 5% tax on assets for residents worth more than $1.1 billion, with a smaller phased-in tax between $1 billion and $1.1 billion.
• The sponsoring union estimated the measure could raise $100 billion over five years; CBS News said 90% would go to healthcare and the remainder to education, food assistance and tax administration.
• Opponents, including technology executives and billionaires, spent hundreds of millions of dollars campaigning against it; the Wall Street Journal report and France 24 said the ‘no’ side raised more than ten times as much as supporters.

How Proposition 40 was designed

The sponsoring union estimated the tax could raise $100 billion over five years to offset looming Medicaid cuts, according to the Wall Street Journal report. CBS News reported that a Stanford University study put the possible proceeds closer to $30 billion. The same study estimated that billionaires who had left California took about $540 billion, or 30%, of the state’s billionaire wealth outside the potential tax base. These were competing estimates, not revenue figures from an enacted tax.

What it means

California relies heavily on income taxes paid by its richest residents, France 24 reported. Gov. Gavin Newsom and other opponents argued that a wealth tax limited to California could encourage wealthy people to leave and weaken the state’s long-term fiscal position, CBS News reported. France 24 said the California Medical Association and Planned Parenthood also opposed the measure, raising concerns about how proceeds would be distributed and the budget effect if wealthy taxpayers left.

Opposition included Google co-founder Sergey Brin and other technology executives and billionaires, whose campaigns spent hundreds of millions of dollars, the Wall Street Journal report said. The anti-tax campaign called Proposition 40 a “reckless experiment” and said it wanted to work with Gov.-elect Xavier Becerra and others on alternatives to healthcare cuts. NBC News reported that some progressives who generally favor higher taxes on wealthy people opposed the initiative because it was a one-time levy focused mainly on healthcare.

The reports described a race call or projection; certified final vote totals were not provided.