SACRAMENTO, Calif. (Diya TV) — California voters rejected Proposition 40, a proposed one-time tax of up to 5% on the covered assets of billionaires and certain trusts. The Associated Press called the measure’s defeat Monday. In the latest count available Wednesday night, 52.5% voted no and 47.5% voted yes; election officials will continue counting ballots before certifying the results.
The tax would have applied to California residents with more than $1 billion in covered assets, including businesses, securities, art, collectibles and intellectual property. It excluded real estate and some pensions and retirement accounts. The proposal directed 90% of revenue to health care and 10% to food assistance or education programs.
Supporters framed the measure as a way to offset federal health care cuts. The union that sponsored Proposition 40 projected the tax would raise about $100 billion over five years. The state’s independent fiscal analysis estimated the measure would generate tens of billions over several years and could reduce state income-tax revenue by hundreds of millions of dollars or more annually if wealthy residents changed their financial or residency plans.
The campaign split California Democrats. The state Democratic Party and labor groups backed the tax, while Gov. Gavin Newsom opposed it. Newsom supported Proposition 42, a competing measure that would prohibit new taxes on financial assets and most retroactive taxes.
Proposition 42 remained ahead in the latest count available Thursday morning, with 51.3% voting yes and about 91% of the estimated vote counted. Its language conflicts with Proposition 40’s proposed tax, but Proposition 40’s defeat already means the billionaire tax will not take effect.
Money also shaped the contest. The Proposition 40 campaign raised about $33.5 million. Google co-founder Sergey Brin contributed $102 million to Building a Better California, a committee that opposed the tax and supported countermeasures. Opponents and allied committees raised far more overall, although some contributions funded campaigns against multiple propositions.
Opponents argued that a wealth tax could drive entrepreneurs and investors out of California, putting jobs and state revenue at risk. Supporters said the state needed new funding to protect health care services as federal support shrank.
Dave Regan, president of Service Employees International Union–United Healthcare Workers West, said the union would pursue another tax proposal in 2028 if state lawmakers fail to find another way to support health care. The vote ends this year’s effort but leaves unresolved how California will address the anticipated funding gap.
