California voters have defeated Proposition 40, a ballot measure that sought to impose a one-time 5 percent levy on residents with a net worth topping $1 billion, according to official election data.
With all precincts counted, 52.8 percent of voters, or 5,909,899 people, cast ballots against the proposal, according to the California secretary of state’s office. The Associated Press determined the measure had failed late Monday, concluding one of the costliest ballot initiative fights in state history.
Deep divisions among state Democrats
The measure targeted roughly 250 billionaires across California and would have applied retroactively to those residing in the state on or before Jan. 1, 2026. Backers calculated the policy could raise $100 billion over five years to plug an estimated $20 billion annual hole in Medi-Cal, the state’s low-income healthcare program, caused by federal spending reductions in the One Big Beautiful Bill Act.
Despite progressive victories across the state during the midterm elections, Proposition 40 struggled after drawing high-profile opposition from within the Democratic Party. California Gov. Gavin Newsom publicly campaigned against it, arguing in a June essay that writing tax policy for a single sector was flawed.
Newsom objected to dedicating nearly the entire revenue haul to healthcare, noting it neglected public universities, childcare, affordable housing and emergency services. Newsom, who has advocated for a national wealth tax on fortunes exceeding $100 million, warned that wealthy residents could simply relocate to low-tax states. Gov.-elect Xavier Becerra also came out against the ballot measure.
A broad coalition of public-sector labor unions and medical organizations joined the opposition, including the California Teachers Association, the California Professional Firefighters and the California Medical Association. The teachers union criticized the proposal for allocating 90 percent of funds to healthcare and leaving little for public schools.
Massive spending by tech leaders
Corporate executives and Silicon Valley leaders mobilized aggressively to derail the proposal, warning it would damage the state economy and prompt an exodus of high earners and businesses. Opponents poured an estimated $300 million to $400 million into advertising and rival efforts, NPR reported.
Google co-founder Sergey Brin contributed more than $100 million to groups working to defeat Proposition 40. In comments to The New York Times, Brin, who was born in the Soviet Union, likened the tax to the system his family fled during his childhood.
Supporters of the measure included Sen. Bernie Sanders, an independent from Vermont, California Democratic Rep. Ro Khanna and various healthcare unions. Proponents argued the ultra-rich were not contributing their fair share to support critical public services.
Following the defeat, Suzanne Jimenez, a leader of the Yes on 40 campaign, condemned the heavy corporate political spending. Jimenez said in a statement that wealthy opponents purchased a temporary victory at the ballot box, adding that the debate over billionaire taxation was far from over.
The road ahead for wealth tax debates
Economists and political strategists remain divided on what the outcome means for future tax policy. UC Berkeley economist Gabriel Zucman told NPR that the one-sided blitz of negative advertisements skewed public perception, while Stanford economist Joshua Rauh argued that voters, even in heavily Democratic areas such as the San Francisco Bay Area, grew uneasy about the potential economic fallout.
Supporters have already launched ads in early presidential primary states criticizing Newsom over his opposition, signaling that wealth taxes will remain a central dispute in Democratic politics heading into the 2028 presidential race.
