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Under Proposition 42, the state would not be able to institute any new taxes on personal property, including retirement accounts, other than real estate. It would also prevent most new taxes from being applied retroactively.
Understanding Prop. 42
Proposition 42 is partly an effort to block another measure voters will see on their ballot, Proposition 40. Also known as the billionaire’s tax, Proposition 40 seeks to establish a one-time 5% tax on the net worth of billionaires in California. (You can read more about Proposition 40 here.)
Proposition 42 would effectively kill Proposition 40, even if both measures pass: If Proposition 42 gets more votes than Proposition 40, the billionaire’s tax could be declared void, according to an analysis from the California Secretary of State.
For example, under Proposition 40, a billionaire subject to the tax would have to pay based on their accumulated wealth, including wealth from their intellectual property and artwork and jewelry they have in the state. Proposition 42 would make it so such assets cannot be taxed.
Official title on the ballot: Prohibits new state personal property taxes and certain retroactive state taxes
Language you will see:
Prohibits any new state tax (1) imposed on the ownership of personal property (all things people own other than real estate), or (2) that applies retroactively based on taxpayer’s past activities. Nullifies taxes enacted after January 1, 2026 that conflict with this measure. Fiscal Impact: Possibility that tax revenues will not go up as much in the future.
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What your vote means
- A "yes" vote means: The state could not establish new taxes on the ownership of financial assets or other personal property.
- A "no" vote means: The state would continue to have the option to establish new taxes on the ownership of financial assets or other personal property.
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Here's what supporters say
- California's high cost of living and taxes have made living in the state difficult, and Proposition 42 aims to put a cap on any attempt to go further. For example: California’s constitution currently allows for taxes on things people own, such as art on display in a home, that haven't generated any taxable revenue. Proposition 42 would block such taxes.
- Notable endorsements: Los Angeles and Orange Counties Building and Construction Trades Council; California Professional Firefighters; California Society of Certified Public Accountants; several business groups, including the Valley Industry and Commerce Association and Greater Los Angeles African American Chamber of Commerce.
Here's what opponents say
- They criticize Proposition 42 for shielding billionaires from paying a one-time tax to help stabilize the healthcare system in California.
- Notable opponents: California Democratic Party; SEIU-United Healthcare Workers West; supporters of Proposition 40.
Potential financial impact
The California Secretary of State’s analysis found that, if approved, Proposition 42 could make it harder for the state to raise taxes in the future: “This could reduce future tax revenues. When and by how much future revenues would be reduced is unclear.”
What it takes to win
A majority is needed to pass.
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