California’s Billionaires Spent Big to Sink a Wealth Tax. Is It Working?

It looks as if California's billionaires have been marked safe for now. Proposition 40, California’s proposed billionaire tax, is trailing as votes continue to be counted, though the race has not been called. Here is a look at this proposition and what its likely rejection means.

California Voters Forecast to Reject Billionaire Tax

California voters are expected to reject Proposition 40, an initiative that would impose a one-time 5% tax on the net worth of residents who are billionaires. The money was earmarked to fund healthcare programs throughout the state. Supporters of Proposition 40 estimated that it would have raised about $100 billion for these programs.

While roughly 90% of the revenue would be directed to healthcare, the remaining funds would be sent to education and food assistance programs. A small percentage would also be set aside for administrative purposes.

The proposal was on the state's ballot for the midterm elections. If passed, it would tax the wealth of billionaires who were living in the state on January 1, 2026. Resident billionaires hit with this tax could choose to spread out the payments across five years; however, that would cost them more money.

Where does the vote stand now? According to the Associated Press, the "no" vote is now over 55%. As of Thursday, approximately 60% of the vote has been counted.  

Proposition 40 has proven to be a controversial issue. The California Democratic Party voted to endorse the proposal with a narrow vote, signaling that it did not have widespread support within the state's most liberal contingent. Several statewide groups, including the powerful California Teachers Association and Planned Parenthood Affiliates of California, opposed the proposal. These groups asserted that it could do more harm than good by driving away wealthy taxpayers if they were discouraged from living in California.

California Gov. Gavin Newsom also opposed the proposal. The governor argued that the tax would drive the state's billionaires away, resulting in the loss of massive tax revenue. “The Governor supports a national tax on billionaires and is proud to stand with teachers, firefighters, reproductive health clinics, and others in opposing this poorly written state measure that will harm California,” a Newsom spokesperson told ABC News.

How the State's Wealthiest Residents Are Responding

The proposition sent some of the Golden State's wealthiest residents searching for ways to avoid paying the tax. For instance, Meta CEO Mark Zuckerberg threatened to move if the proposal passed. Zuckerberg would be slapped with a tax bill of about $12.4 billion if the proposition passed. CBS News recently reported that Zuckerberg has a net worth of $247 billion, citing a recent Meta regulatory filing.

In preparation for the proposition, Meta's board approved a new class of nonvoting common stock that Zuckerberg could sell to pass the tax. This would keep Zuckerberg near Meta's headquarters in Silicon Valley and allow him to keep voting control.

In addition, The New York Times reported last year that Google co-founder Larry Page and venture capitalist Peter Thiel were debating spending less time in their home state of California in case the proposition passes. Likewise, Google co-founder Sergey Brin invested about $102 million into fighting the proposition.

In total, the state's billionaires pooled together about $293 million to oppose the proposition, according to a recent analysis from the Los Angeles Times. This included spending over $1 million per day over the first few weeks of September.

Not all of the state's richest residents oppose the tax. For example, Nvidia CEO Jensen Huang told CBS Sunday Morning in October that he would pay the $8 billion tax he would owe.

“I don’t mind paying taxes. The more you make, the more taxes you pay. I’m okay with that,” Huang said. “I am the ultimate American Dream. The fact that I can afford to pay $8 billion in taxes over five years is a privilege. I’m not afraid of paying taxes. I’m just afraid of being poor.”

On the other side of the discussion, Vermont Sen. Bernie Sanders, who campaigned in support of the proposal, said that it was a test of the nation's true democracy. “In America today, is it possible for a ballot item to win when it is being opposed by a handful of billionaires who are spending over $200 million? That is the question. Do you still have a democracy in this country, or will billionaires rule?” Sanders explained.

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