California voters are deciding the fate of a proposed billionaire wealth tax in Tuesday’s midterm elections, with supporters pointing to billions in potential public funding and business leaders warning that the measure could push wealthy residents out of the state.
The proposal, known as Proposition 40, would impose a one-time 5% tax on individuals and trusts holding assets worth more than $1 billion. The revenue would support state healthcare programs, public education and food assistance.
What California’s Billionaire Tax Would Cover
The tax would apply to assets including businesses, securities, art, collectibles and intellectual property. Real estate, pensions and certain retirement accounts would be exempt. Payments could be made over five years, and the proposal as drafted would apply retroactively to people who were California residents on Jan. 1, 2026.
Supporters cite an estimate from economists Jasper Boll, Emmanuel Saez and Gabriel Zucman that the tax could raise roughly $100 billion, based on about $2.3 trillion in California billionaire wealth.
However, the proposal has prompted concerns about wealthy residents leaving California.
Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) co-founders Larry Page and Sergey Brin, Oracle Corp. (NYSE:ORCL) Executive Chairman Larry Ellison and PayPal Holdings Inc. (NASDAQ:PYPL) co-founder Peter Thiel are among the prominent billionaires reported to have moved out of the state or relocated businesses.
Affirm CEO Says He Would ‘Probably’ Leave
Max Levchin, co-founder and CEO of Affirm Holdings Inc. (NASDAQ:AFRM) said he would “probably” leave California if voters approve the tax, Bloomberg reported Monday.
“I love California. I think it’s beautiful,” Levchin said. He criticized the proposal’s approach to taxing accumulated wealth, calling the idea of accepting “asset seizure” to raise revenue “so wrong.”
Supporters Say Tax Could Protect Healthcare Funding
Supporters argue that billionaires often pay relatively little in income taxes because much of their wealth comes from investments. In September, Sen. Bernie Sanders (I-Vt.) backed the proposal, saying it could help preserve healthcare coverage for 3 million working-class residents.
Sanders also said more than 200 billionaires held $2.2 trillion in wealth and accused wealthy opponents of spending $229 million to defeat the measure. Those figures were part of his argument in support of the tax.
Economic Cost Remains A Concern
A Hoover Institution analysis previously examined the potential long-term costs of the proposal. Researchers Joshua Rauh and Benjamin Jaros estimated that departures by wealthy residents could reduce the tax base by about 30%. Their simulations found the tax had a negative net present value of $38.9 billion in 85% of scenarios.
The analysis estimated collections of $28 billion to $36 billion after accounting for tax avoidance, raising questions about whether the measure would deliver a lasting financial benefit to California.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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