On 3 November, Californian voters will decide the fate of Proposition 40 — an initiative proposing a one-off tax of up to 5% on individuals and trusts with assets exceeding $1 billion. Supporters want to channel most of the revenue into healthcare, whilst opponents, including Sergey Brin and Governor Gavin Newsom, cite risks to investment and future tax revenues.
Briefly about the main points
- It is proposed that the tax be levied as a one-off charge on assets worth more than $1 billion.
- Ninety per cent of the revenue is set to be channelled into the health service.
- Estimates of the revenue range from approximately $40 billion to $100 billion.
- Polls in August and September showed that the supporters were in the lead.
- Sergey Brin spent over $100 million on opposing the initiative.
Which assets will the initiative cover, and what will the funds be spent on?
The tax base should include business assets, securities, works of art, collectables and intellectual property. Property and some pension assets will not be included.
According to the authors’ plan, 90% of the funds raised will be channelled towards healthcare. The remaining 10% is earmarked for food aid or educational programmes. One of the authors of the initiative, a professor of economics at the University of California, Berkeley Emmanuel Saez, describing it as a way of raising funds from the state’s wealthiest residents to finance the healthcare system.
Estimates of revenue differ by tens of billions of dollars
Pros. data According to Reuters, there may be as many as 250 billionaires living in California, whose combined wealth exceeds $2 trillion. Supporters expect around $100 billion in one-off revenue, whilst critics estimate the figure to be closer to $40 billion.
An official analysis by the state authorities forecasts tens of billions of dollars over the next few years. At the same time, it acknowledges that, in future, California may lose less than $1 billion in tax revenue from billionaires each year as they change their place of residence or the structure of their assets.
Polls favour the frontrunners, but do not predict the outcome
An August survey by the UC Berkeley Institute of Governmental Studies showed support of 48% amongst likely voters, whilst 41% were against it. In a September poll by the Public Policy Institute of California, the split was 52% to 46%.
Both polls reflect the mood at the time of the surveys, rather than the outcome of a future vote. Political analysts quoted by Reuters point out that during campaigns, Californian referendums often lose support, and voters who are undecided for a long time frequently choose to vote against the changes.
Brin and Newsom have spoken out against a state-level tax
Co-founder Google. Sergey Brin He has spent over $100 million on a campaign against Proposition 40 and other measures that could neutralise its effect, according to Reuters. He attributes his stance to the risks to California’s economy and investment climate.
Governor Gavin Newsom also does not support the initiative. Instead, he advocates a federal tax on high net worth individuals that would apply across the whole country. Supporters of Proposition 40 dismiss the scenario of a mass exodus of companies and capital, citing the state’s universities, talent pool, technology ecosystem and infrastructure.
The initiative went through the state’s direct democracy process
In California, citizens can put a legislative initiative to a public vote after collecting the required number of signatures. For Proposition 40, at least 874,641 signatures were required; it was put to a vote in June 2026.
Reuters notes that, historically, voters in the state have approved roughly one in three citizens’ initiatives. In 2022, Proposition 30, which also provided for tax increases for the wealthiest taxpayers, failed to secure a majority of the vote.
