On Nov. 3, Californians will be voting on whether to impose a one-time 5% tax on the net worth of billionaires.
Proposition 40 could generate billions of dollars, mostly for health care, but opponents say it could drive wealthy taxpayers out of the state.
The measure would apply to individuals worth at least $1 billion and who were California residents on Jan. 1, 2026. Billionaire taxpayers could pay in whole or over five years with interest.
What is the proposition’s purpose?
Darien Shanske, a UC Davis law professor who helped craft the measure, said it was written to be a short-term solution to mitigate the effects of the Trump administration’s One Big Beautiful Bill Act.
The 2025 bill rewrote Medicaid rules and cut federal funding from California, which could cause millions in the state to lose their health insurance over the next four years, according to CalMatters.
Shanske said that he hopes the Medicaid cuts would be repealed by 2030 and that during this health care gap, the measure would keep “people getting their preventive checkups.”
Dr. Teginder Dhanoa, a medical director of urgent care operations at John Muir Medical Group in Northern California, said limited access to primary care is directly affecting his work.
At one clinic serving primarily Medicaid and Medi-Cal patients, he said patients are turning to urgent care after waiting three months for a primary care appointment.
“We’re making the diagnosis of cancer, which should not be happening in an urgent care office,” Dhanoa said. “[B]ut sometimes they end up coming to us because it’s just honestly too late and they’re having severe symptoms.”
Dhanoa said seeing preventable cuts worsen has shaped his view on healthcare funding, but remains undecided on the proposition out of concern it is not a long-term solution.
What are the effects on the economy?
The California Legislative Analyst’s Office (LAO) estimates that the measure would raise tens of billions, with 90% of the revenue going to health care programs.
However, the office projects that California could lose less than $1 billion annually in income-tax revenue if billionaires leave California.
According to Yahoo News, an announcement of a billionaire’s tax caused a wave of panic, with six billionaires leaving the state before the January cutoff, taking $27 billion in potential revenue.
Shanske, however, does not expect billionaires leaving to be a continued problem.
“All these new people who are moving in this year for the AI boom,” Shanske said. “They’re just not going to be subject to this tax.”
Could the tax be applied to ordinary Californians in the future?
The language of the proposition allows the state legislature to amend the bill if it has two-thirds of the membership vote, language that is common in ballot measures, according to Shanske.
He explained that the legislature has limited authority in amending voter-approved initiatives, which he claims would prevent the state from expanding Prop. 40 to non-billionaires in the future.
How are people taxed?
Unlike a personal income tax which applies to money earned during a given period, Prop. 40 would tax wealth, including stocks, private businesses, artwork and intellectual property. Real estate and most pension and retirement plans are excluded.
But determining the value of some of the assets could be difficult, according to Charles Swenson, a professor of accounting at USC.
“If somebody owns a technology company, you can value the real estate, but how do you value the intellectual property?” Swenson said.
Who is backing the measure and who is against it?
Supporters of the ballot initiative include the California Democratic Party, American Federation of State, County and Municipal Employees (AFSCME), Sen. Bernie Sanders and Rep. Ro Khanna.
Opponents include Gov. Gavin Newsom, California Medical Association (CMA) and Planned Parenthood Affiliates of California. CMA and Planned Parenthood both said Prop. 40 would only provide temporary, uncertain healthcare funding.
Additionally, many billionaires have backed Propositions 41 and 42.
Prop. 41 is a tax audit and spending cap enforcement and Prop. 42 would prevent taxes on assets. If either measure receives more votes than Prop. 40 then they will invalidate the billionaire’s tax.