The electorate of California rejected this Monday the application of an extraordinary 5% levy on the assets of residents with a net worth of more than $1,000 million (more than 891 million euros), according to the first projections.
The initiative, known as Proposition 40, was one of the most significant measures submitted for consultation in this election cycle and has ended up being defeated by the 'no' campaign. That campaign has been driven by groups that, with the financial backing of billionaire allies, have allocated tens of millions of dollars to ads against the proposal, according to CNN.
The wealth tax would have reached about 250 multi-millionaires residing in California, and the revenue obtained would have been directed mainly to strengthen healthcare, after federal cuts to Medicaid and other programs. The proponents calculated that total revenue would rise to $100 billion (89,112 million euros) over a five-year period, of which 90% would be devoted to health programs and the remaining 10% to education, food assistance, and administration of the tax itself.
Those who defended Proposition 40 argued that the state needs additional resources to offset the federal healthcare cuts that will be applied in 2025 under the "One, Big, Beautiful Bill" and to ensure the protection of hospitals, emergency services, and clinics. They also emphasized that billionaires can accumulate large fortunes thanks to the stock market and the revaluation of their companies without paying income taxes on those capital gains until they are realized.
The proposal has caused a strong disagreement between political officials and organizations that, in general terms, share the agenda of the Democratic Party. Although it had the support of the California Democratic Party and numerous unions, it has run into opposition from the governor, Gavin Newsom, the former Orange County representative Katie Porter, and influential professional and healthcare associations. Newsom and Porter, who on other occasions have backed tax increases on corporations and large fortunes, argued that this measure would push the richest taxpayers to leave the state, damaging public finances in the long term by reducing the tax base.
At the same time, a coalition of billionaires has mobilized against Proposition 40, including the cofounders of Google, Sergey Brin and Larry Page; the venture capital investor John Doerr; the cofounder of PayPal and Palantir, Peter Thiel; the venture capital investor Vinod Khosla, and the CEO of Stripe, Patrick Collison.
The more than 250 million dollars (222.8 million euros) raised for the campaign against the tax on billionaires through the group "Building a Better California" have also been earmarked to support two alternative initiatives, Propositions 41 and 42. These proposals would set limits on special taxes and could block the enactment of the billionaire tax if either of them obtains more support at the polls than Proposition 40.