California voters are set to decide on Proposition 40, a high-profile ballot measure that would impose a one-time 5% tax on assets owned by individuals with a net worth exceeding $1 billion. This wealth tax, distinct from traditional state taxes assessed on income and capital gains, aims to generate significant revenue by targeting the state’s ultra-wealthy.
The measure has sparked intense debate and drawn substantial financial backing from billionaires who would be subject to the tax. Leading the opposition is Sergey Brin, co-founder of Google, who reportedly relocated out of California, potentially to avoid the tax. Brin has contributed $102 million to Building a Better California—a coalition funding two countermeasures intended to nullify Proposition 40 even if it passes.
Supporters and critics agree only on the basic facts of the tax, with broader discussions revolving around its projected fiscal impact, potential effects on billionaire residency, and possible political ramifications. Estimates on revenue generation vary widely. Proponents, including economists Emmanuel Saez and Gabriel Zucman of UC Berkeley, forecast up to $100 billion in revenue. In contrast, conservative economist Joshua D. Rauh from the Hoover Institution estimates revenues closer to $40 billion but cautions this figure is uncertain.
Rauh’s analysis also suggests the tax could lead to an exodus of billionaires, generating losses in personal income tax revenue that may offset or even exceed wealth tax gains over time. He places the net present value of the tax at a possible $24.7 billion loss but acknowledges the inherent uncertainty in these forecasts. Critics of Proposition 40 have widely cited Rauh’s “central scenario” to argue that the measure would reduce state revenues by billions of dollars. However, Rauh himself emphasizes that all estimates are based on assumptions and should be seen as approximations rather than definitive predictions.
Questions about billionaire migration intensify the uncertainty. Rauh identifies at least 10 billionaires with $784.5 billion in combined net worth who have left California, though some moved before the tax was proposed. Supporting claims of a broader “wealth exodus” comes from a conservative commentator who cited anonymous conversations suggesting that multiple billionaires plan to leave, though the veracity and transparency of these sources have been questioned.
Opponents of Proposition 40 also warn that its passage could set a precedent for further tax increases. However, the measure requires a two-thirds legislative vote to alter its structure or broaden its base, consistent with California’s existing tax legislation process. Claims that it would tax retirement accounts for the first time are also challenged, as pensions and most individual retirement accounts would be exempt, with exceptions primarily affecting very large Roth accounts held by the ultra-wealthy.
The measure faces additional challenges, including administrative hurdles related to assessing and valuing billionaires’ assets, and potential legal battles over its retroactive application, which targets residents as of January 2026 with asset valuations from December 2026.
Despite being championed by labor unions like the Service Employees International Union-United Healthcare Workers West, which proposed the measure to address healthcare funding shortfalls, Proposition 40 lacks broad political support. Key Democratic figures, including Governor Gavin Newsom and Attorney General candidate Xavier Becerra, oppose the initiative, reflecting divisions within the state’s labor and political communities.
As voters weigh the measure, the decision appears less a straightforward fiscal calculation and more a reflection of broader views on economic inequality and the role of wealth in California politics. The campaign highlights the tension between addressing disparities and the uncertain consequences of imposing taxes on the state’s richest residents.