California voters will consider Proposition 40 on Tuesday, a proposal to impose a one-time 5 percent tax on the wealth of the state’s approximately 250 billionaires. Many of these individuals are tech industry leaders who have benefited from a tax system that often subjects their income to lower rates than those paid by many employees. While the measure aims to increase tax contributions from the ultra-wealthy, critics argue that it addresses only a fraction of the broader inequalities within California’s tax framework.

At the end of 2025, California’s billionaires held a combined estimated net worth of around $2 trillion. However, this figure pales in comparison to wealth held by a larger group of affluent residents known as “everywhere millionaires.” This group, composed of about 450,000 households with private businesses and at least $5 million in wealth, collectively controls an estimated $9 trillion in assets. These individuals operate a wide array of businesses—including car dealerships, construction firms, medical practices, and trucking companies—throughout the state, often within everyday communities.

Unlike billionaires, everywhere millionaires typically pay higher tax rates, but they too benefit from loopholes favoring investment income over wages. Their prominence in local economies and communities, alongside their often relatable entrepreneurial stories, shields them from intense public scrutiny and challenges to their tax benefits. Additionally, policymakers face a complex tax landscape where exemptions and preferential treatments are granted to numerous groups—ranging from venture capitalists to heirs and homeowners—fostering perceptions of unfairness that undermine confidence in the system.

Economists critical of Proposition 40 highlight a deeper underlying issue: California’s property tax laws, established under Proposition 13 in 1978, have fundamentally shaped the state’s fiscal and housing landscape. Prop 13 limits property taxes to 1 percent of assessed value, caps annual assessment increases at 2 percent, and recalibrates property values only upon sale or substantial renovation. These regulations, combined with constraints on new construction, have contributed to surging housing prices. By 2024, California accounted for roughly 40 percent of all U.S. owner-occupied homes valued at $2 million or more despite representing 12 percent of the national population.

These provisions have also produced stark disparities in property tax bills, where long-time homeowners may pay far less than new buyers of similar properties, regardless of income. The average effective property tax rate for California homeowners stands at about 0.8 percent, trailing behind states like Texas, where the rate is approximately 2 percent. Analysts estimate that raising California’s property tax rates to Texas levels could double property tax revenues and reduce housing prices by about 13 percent.

Proposition 40’s potential to raise an estimated $100 billion also faces challenges. Some billionaires may relocate to avoid the levy, and the tax is designed as a one-time measure, leaving systemic inequities largely intact afterward. With California’s annual budget approaching $540 billion, relying on a small elite to resolve fiscal imbalances appears insufficient.

Broader progressive tax reforms targeting a wider base of wealthy individuals, including those benefiting from current property tax structures, may offer more sustainable solutions but remain politically challenging. Advocates suggest that tax policy should focus on funding collective public goods such as education and infrastructure, emphasizing fairness and shared responsibility rather than punitive measures.

Experts contend that meaningful tax reform in California demands a comprehensive reassessment of longstanding policies like Prop 13. Without significant structural changes, one-off taxes like Proposition 40 risk falling short of addressing the state’s broader fiscal and social equity challenges.