California voters will decide the outcome of Proposition 40 next month, a ballot initiative that proposes a one-time, 5% state tax on the net worth of the state's approximately 200 billionaires. The measure, led by a petition drive from the SEIU United Healthcare Workers West union, aims to raise an estimated $100 billion over a five-year period.
The proposal was drafted in response to federal funding cuts to Medicaid. Dave Regan, leader of the healthcare workers union, stated the tax is intended to restore $100 billion in healthcare funding to prevent an estimated 3.5 million people from losing health insurance and to keep hospitals and clinics from closing. Regan described the measure as a "five-year solution" rather than a permanent one.
The initiative has faced opposition from several prominent figures, including California Governor Gavin Newsom (D), who described it as a "flawed initiative." Former Rep. Katie Porter (D-CA) also expressed opposition, stating that she believes this specific tax could cause wealthy residents to leave the state. Google co-founder Sergey Brin has reportedly spent more than $100 million to oppose the measure.
Two other measures on the ballot, Propositions 41 and 42, serve as competing initiatives. If either of these receives more votes than Proposition 40, the billionaire tax would be nullified even if it passes. Nvidia CEO Jensen Huang, whose net worth is approximately $200 billion, stated he views the ability to pay a projected $8 billion in taxes over five years as a privilege.
The fiscal impact on the state is estimated at $100 billion over five years. On an individual level, a billionaire with a net worth of $200 billion, such as Nvidia’s Jensen Huang, would see a tax bill of approximately $8 billion over that period. Opponents argue the concrete change for the state would be a permanent loss of tax revenue if billionaires relocate to avoid the one-time wealth tax. They note that some individuals, including Peter Thiel, Larry Page, and Sergey Brin, have already left the state since the tax was proposed. This shift could impact future state budgets that rely on income, property, and capital gains taxes from these individuals.
If Proposition 40 passes on November 3, it would set a precedent for taxing unrealized wealth held in stocks and investments, which are not currently taxed until sold. The architect of the bill, Dave Regan, suggested that if successful, other states may attempt to implement similar wealth taxes. The statewide vote is scheduled for November 3. The final result will depend not only on the vote for Proposition 40 but also on whether Propositions 41 or 42 receive a higher number of total votes.