California voters reject one-time billionaire tax measure

California voters will reject Proposition 40, ending a plan to impose a one-time tax on the state's wealthiest residents. NBC News projected the measure's failure Monday after counting 83% of expected votes. Nearly 53% of those ballots opposed the proposal, while 47% supported it.

The ballot measure sought to require individuals or couples with a net worth exceeding $1 billion as of December 31, 2026, to pay a tax equal to 5% of their wealth. Supporters, including Sen. Bernie Sanders and Rep. Ro Khanna, argued the state could raise roughly $100 billion. They stated the revenue would help offset federal funding cuts to health care and nutrition assistance programs.

Democratic leaders opposed the measure. Gov. Gavin Newsom and gubernatorial candidate Xavier Becerra argued the tax could provide a temporary boost while creating negative long-term consequences. Newsom supports a national billionaire tax but argues a California-only version puts the state at a competitive disadvantage because wealthy residents might move elsewhere to avoid it. Becerra called Prop. 40 "sketchy" and said the state needs a long-term solution for health care funding.

The nonpartisan Legislative Analyst's Office estimated the measure could eventually reduce state revenues by around $1 billion annually. The office noted that some wealthy residents could leave the state, reducing future tax collections. It also warned that the state would have to spend tens of millions of dollars each year to administer and enforce the tax.

The LAO stated that the measure could mean less money for the state's General Fund, which pays for many public services, including education, health care and prisons. The office's analysis concluded that while initial revenue might help for several years, the long-term financial impact on the state's budget would be negative.