California voters have decisively rejected a first-in-the-nation wealth tax on billionaires, handing a major victory to tech and business executives who poured hundreds of millions into the campaign against it. According to a projection from Decision Desk HQ (DDHQ), 54% of voters opposed Proposition 40, while 46% supported it, with 76% of the vote counted as of 8:51 p.m. EST.
The measure would have imposed a one-time 5% tax on the wealth of California's roughly 200 billionaires, generating tens of billions of dollars, according to a nonpartisan analysis from the Legislative Analyst's Office. Revenue was earmarked primarily for state healthcare programs, with smaller portions for food assistance and education.
The defeat marks a significant setback for progressive advocates who had hoped to make California the first state to tax extreme wealth directly. Pre-election polls showed a narrow race, but opposition solidified in the final weeks as a coalition of Silicon Valley executives, including many tech billionaires, funded a massive campaign through the nonprofit Building a Better California, which raised over $333 million to defeat the measure.
Governor Gavin Newsom, a Democrat, broke with his party's progressive wing and publicly opposed the proposal. In a June Substack post, Newsom argued that dedicating nearly all revenue to healthcare would neglect other critical needs. “There is nothing for housing, nothing for childcare, nothing for public safety workers who must answer 911 calls, and nothing for our public universities that have powered California’s economy for a decade,” he wrote. “This is not how we should set California’s budget priorities.”
Newsom said he supports a federal billionaire tax but objected to the state measure's narrow focus. His opposition was echoed by the California Democratic Party, which officially supported the proposition, while unions including the AFL-CIO and Teamsters backed it. The split highlighted a broader intra-party debate over how to address wealth inequality.
Proponents argued that the tax would provide a stable revenue stream for essential services, especially healthcare, and reduce the state's reliance on volatile income taxes. Critics, including many business leaders, warned that the tax would drive billionaires out of California, hurting the state's economy and tax base. The Legislative Analyst's Office noted that the tax could be subject to legal challenges and that billionaires might relocate to avoid it.
This vote comes amid a broader national conversation about taxing the ultra-wealthy, with some Democrats in Congress pushing similar ideas. However, California's rejection may dampen momentum for such proposals elsewhere. In a related development, California voters also rejected a voter ID measure, and approved a ban on retroactive taxes, further signaling a moderate turn on fiscal issues.
Newsom, who is term-limited and has been speculated to have national ambitions, has made headlines recently for commuting all death sentences and for his handling of tech regulation. The wealth tax defeat is likely to be viewed as a key moment in his legacy, as he positioned himself against a measure championed by the left.
With the vote now certified, the focus shifts to the state's budget and whether other progressive tax proposals will gain traction. For now, California's billionaires can breathe a sigh of relief, but the debate over wealth taxation is far from over.
