California voters rejected a proposed one-time 5% tax on billionaires’ wealth, a measure that supporters said could have raised tens of billions of dollars for healthcare.
The defeat came after some of the state’s wealthiest residents warned they might leave California over the proposal.
The tax would have applied to individuals who resided in California as of January 1, 2026, with payments spread over five years. California is home to one of the country’s largest billionaire populations and relies heavily on top earners for its budget funding, making the potential departure of wealthy residents a concern for state finances.
They worried about the loss of revenue from billionaires leaving and the macroeconomic effects of the tax, which would mean less money available for the rest of the household budget.
Proponents, including Senator Bernie Sanders (I-Vt.) and the Service Employees International Union-United Healthcare Workers West, argued the tax could help counter cuts to healthcare and food assistance by the Trump administration.
Governor Gavin Newsom opposed the tax, stating that California should combat wealth inequality without driving away billionaires. Economist Wayne Winegarden, a Senior Fellow at the Pacific Research Institute, suggested fears that the tax could extend beyond billionaires to affect other wealthy residents, potentially causing them to leave, may have weakened its support. The message that others could be next resonated with voters, and the levy was probably not a one-time, billionaire-only burden,
he said.
Winegarden said the rejection of the tax could end the exodus associated with the proposal, but California remains not competitive on taxes. The state is already losing taxpayers to other states. Los Angeles County, home of Hollywood and one of the country’s largest economic engines, had the largest taxpayer losses in the nation, with a net 17,496 tax filings moved to other states, taking income of nearly $1.9 billion with it.
Voters also considered Proposition 42, a separate initiative backed by tech billionaires aimed at preventing new taxes on personal property. It was leading, and its passage could hinder future attempts to tax billionaires’ wealth, though supporters have vowed to continue their efforts.
