California will submit for voting on the next November 3 the Proposition 40, an initiative that proposes to create a unique tax on the wealth of billionaire residents in the state. The measure would affect those with a net worth exceeding 1 billion dollars as of January 1, 2026.
The proposal comes amid the debate over healthcare funding in California and after federal cuts affecting programs like Medi-Cal, the public healthcare system for low-income individuals.
A 5% tax on wealth
Proposition 40 proposes a 5% and unique levy on the net worth of the affected taxpayers. Therefore, it would not be an annual tax on large fortunes.
The regulation establishes that the tax would be calculated on the wealth of those who meet the requirements on January 1, 2026. Certain assets, such as directly owned real estate, pensions, and some retirement accounts, would be excluded from the calculation. Payment could be made in a single installment or spread over five years, with different conditions in the latter case.
90% of the revenue would go to healthcare
The proposal establishes that 90% of the income obtained will be allocated to public healthcare services. The rest would be mainly dedicated to food programs, education, and the administrative costs arising from the implementation of the tax.
The goal of its promoters is to use these resources to offset part of the loss of federal funding for Californian healthcare.
How much money would it raise?
The final amount is one of the main unknowns of the proposal. The promoters estimate that the tax could generate around 100 billion dollars, while other estimates cited in the debate place the revenue around 40 billion.
The official estimate from the California legislative analyst is more cautious: it estimates that the tax would likely generate tens of billions of dollars, spread over several years, and warns that it is difficult to determine the exact amount due, among other factors, to the evolution of asset values and taxpayer behavior.
Therefore, the 100 billion dollars correspond to a promoters' estimate and not to guaranteed income for public coffers.
The debate on billionaires and tech companies
California concentrates an important part of the great fortunes linked to technology and Silicon Valley. Reuters points out that the state has between 200 and 250 billionaires, whose combined wealth exceeds two trillion dollars, according to its estimates.
The measure has generated opposition among entrepreneurs and organizations that warn of possible effects on investment, economic activity, and the state's tax revenues. Its supporters argue that the tax would allow for additional resources to maintain public services, especially health services.
The California Legislative Analyst's Office itself points out that some taxpayers could modify their tax behavior or leave the state, which could reduce other income from the income tax.
A vote with other related propositions
Proposition 40 will not be voted on in isolation. Other initiatives included on the same ballot could affect its implementation.
The Legislative Analyst's Office warns that if propositions 41 or 42 receive more favorable votes than 40 and the courts determine that there is a conflict between them, the implementation of Proposition 40 could be blocked.
California voters will decide on these measures on November 3, 2026.