Voters in California have rejected a tax on the state’s wealthiest residents, CBS News projects, following a campaign that has split traditional allies and shattered spending records for a tax-related measure in California.
Proposition 40 would have levied a one-time 5% tax on California residents with a net worth of $1 billion, excluding real estate and certain retirement assets. Proponents of the measure said it is expected to generate $100 billion over five years, with 90% going toward healthcare programs and the other 10% for education, food assistance, and administration of the tax.
The proposal came at a time when other states and federal policymakers are debating how to tax extreme wealth and finance public services, and how Proposition 40 was viewed as a bellwether.
The vote was framed by supporters as part of a broader struggle over economic inequality and the political influence of the billionaire class.
Supporters say the state needs additional money to help offset federal healthcare cuts implemented in 2025 under H.R. 1, known as the “One Big Beautiful Bill Act,” and to protect hospitals, emergency rooms, clinics and Medi-Cal services. Proponents also argue that billionaires can accumulate substantial wealth from the stock market and business valuations without paying income tax on those gains until they are realized. They also contend that those who have benefited the most from the state’s robust economy should contribute more toward public services.
The measure created a divide among politicians and organizations that ordinarily align with Democratic priorities. While it was supported by the California Democratic Party and labor unions including SEIU Healthcare Workers West, the principal sponsor of the measure, it was opposed by Gov. Gavin Newsom, former Orange County Rep. Katie Porter, and major healthcare and professional organizations such as the California Medical Association and California Teachers Association.
Newsom and Porter, who have both supported higher taxes on corporations and wealthy individuals, agree with the argument that the proposal would encourage wealthy residents to leave the state and damage its long-term fiscal position by decreasing its tax revenue.
Newsom has also expressed a preference for taxing billionaires at the federal level and says a California-only wealth tax would be limited to funding healthcare and not other needs. Opponents of the measure also claim that the initiative does not provide guarantees about how the money would be allocated among providers and services.
A coalition of billionaires organized in opposition to the measure, such as 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 CEO Patrick Collison.
Wealthy opponents contributed tens of millions of dollars to defeat Prop. 40, with most of the money going to the group Building a Better California, which has raised over $250 million in the campaign against the billionaire tax as of Oct. 28. The funding also went toward supporting two competing measures, Propositions 41 and 42, which would place limits on special taxes and could prevent the billionaire tax from taking effect if either receives more votes than Prop. 40.
A Stanford University study indicated that billionaires who have already left the state, including Brin, Page, and Thiel, have removed about $540 billion, or 30%, of California’s billionaire wealth from potential taxation. The study also concluded that Prop. 40 may generate only about $30 billion instead of the $100 billion estimated by its proponents.
Other economists, including Nobel Prize winners Daron Acemoglu of the Massachusetts Institute of Technology and Joseph Stiglitz of Columbia University, supported the measure, saying that California has attracted more venture funding since Prop. 40 was introduced. An open letter from the economists noted that between 2019 and 2025, the 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.”
One California billionaire who does support Prop. 40 is Nvidia CEO Jensen Huang, whose estimated net worth is about $200 billion.
“I don’t mind paying taxes; the more you make, the more taxes you pay, so I’m okay with that,” Huang told CBS News. “I don’t like tax dollars wasted. But I also support all that this country represents.”
