Proposition 42: The initiative that could stop the billionaire's tax in its tracks

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 Proposition 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.

Pros and cons

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.

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.”

Follow the money

We'll have campaign finance information as we get closer to Election Day.