Proposition 40: The billionaire's tax

Under Proposition 40, California billionaires would pay a one-time 5% tax on their net worth. The money collected from the tax would primarily be used to shore up funding for healthcare in the state, which is currently projected to take a massive blow due to federal cuts. This measure is also one of the few issues that both California gubernatorial candidates Xavier Becerra and Steve Hilton can agree upon: both oppose it.

What’s at stake

Experts warn that a health care crisis is imminent in California due to recent federal cuts and new restrictions to programs that provide coverage for lower-income people. To mitigate those losses and combat a projected doubling of the uninsured population in California by 2030, a healthcare workers union brought Proposition 40 to the ballot.

Authors of the proposition say it would raise a projected $100 billion over five years. The money collected would be earmarked for a specific state fund. Proposition 40 dictates that 90% of that fund would be reserved for health care spending, particularly for Medi-Cal, the program that provides healthcare for low-income Californians. The remaining 10% would support public food assistance programs and the public education system.

Who would be taxed?

It’s unclear precisely how many people would be impacted by Prop. 40, but it’s estimated to be a couple hundred people.

The 5% tax would apply to people who lived in California as of the beginning of the year and whose net worth was equal to or exceeded $1.1 billion at the end of the year. People who meet the residency requirement and have $1 billion to $1.1 billion in net worth would still be taxed but at a lesser rate. For all billionaires, the tax could be paid all at once or over five yearly installments.

Some types of retirement savings and pensions, as well as real estate, would generally be excluded from the net worth calculation, according to the California state legislative analyst's office.

The California Budget and Policy Center provides some estimates of how much would be collected from some of the state’s billionaires. Five percent of Meta CEO Mark Zuckerberg’s $222 billion net worth is $11.1 billion. The potential tax collected on prominent real estate developer Rick Caruso’s $5.9 billion net worth could be $295 million. The Sacramento-based research nonprofit says these examples are “illustrative” and not necessarily the exact amount in taxes that would be collected.

Why this measure could be DOA

Prop. 40 is one of several tax-related measures on the ballot. Some measures seek to block or undermine others. If voters were to approve propositions 41 or 42 on the November ballot, Proposition 40 could be nullified even if it also wins a simple majority of votes.

You can read more here about Prop. 41, which would count revenue collected from special taxes toward the state’s spending limit, and read more here about Prop. 42, which would limit what kinds of assets the state could tax and make rules about applying retroactive taxes.

Why now?

The “One Big Beautiful Bill Act” is the tax law that President Donald Trump signed last year. It will cut an estimated $1 trillion from Medicaid over the next 10 years. For California, that means a loss of around $30 billion annually for Medi-Cal.

If this sounds familiar to Los Angeles County voters, it might be because Measure ER sought to address the same issue locally. That measure, which voters just approved in June, creates a half-cent sales tax that is slated to sunset in 2031.

Here’s what supporters say:

• Billionaires received tax breaks from the same federal bill that could lead to the “collapse” of California’s healthcare system. By asking billionaires to pay a one-time tax, the most vulnerable of Californians will have continued access to health care. 
• Notable endorsements: California Democratic Party; California Nurses Association; California Federation of Labor Unions; SEIU-United Healthcare Workers West; U.S. Senator Bernie Sanders (D-VT); Rep. Ro Khanna, a Democrat who represents Silicon Valley

Here’s what opponents say: 

• Proposition 40 offers a temporary solution. The infusion of cash from the one-time tax will only last so long. Meanwhile, it risks the steady stream of tax income from wealthy taxpayers, who could leave the state if the tax goes into effect. 
• Notable opponents: Gov. Gavin Newsom (D); California gubernatorial candidates Xavier Becerra (D) and Steve Hilton (R); Planned Parenthood Affiliates of California; California Children’s Hospital Association; California Hospital Association; Los Angeles Times Editorial Board 

Potential financial effects

The California Legislative Analyst’s Office estimates the tax levied under Proposition 40 would bring in “tens of billions of dollars spread over several years.”

But it warns that the proposition could drive billionaires out of the state, affecting the state’s General Fund.