California voters kill Prop. 40, the one-time 5% billionaire tax

CBS News projects California voters have rejected Proposition 40, the ballot measure that would have slapped a one-time 5% tax on residents with a net worth of at least $1 billion. Real estate and certain retirement assets were carved out of the calculation. Backers said it would pull in $100 billion over five years, with 90% steered to healthcare and the rest to education, food assistance and running the tax itself.

The measure tore a seam through California's usual political alliances. The California Democratic Party and SEIU Healthcare Workers West, the principal sponsor, backed it, while Gov. Gavin Newsom, former Orange County Rep. Katie Porter, the California Medical Association and the California Teachers Association lined up against it. Newsom and Porter, both past supporters of higher taxes on the wealthy, argued the tax would push rich residents out of state and shrink the revenue base over time.

Opposition money hit records for a California tax measure. A billionaire-backed coalition including Google co-founders Sergey Brin and Larry Page, venture capitalist John Doerr, PayPal and Palantir co-founder Peter Thiel, investor Vinod Khosla and Stripe CEO Patrick Collison poured tens of millions into the fight. Most of it flowed to Building a Better California, which had raised more than $250 million against the tax as of Oct. 28, according to CBS News. Some of that cash also boosted Propositions 41 and 42, competing measures that would cap special taxes and could have neutered Prop. 40 if either outpolled it.

A Stanford University study undercut the campaign's math, finding that billionaires who already left California, including Brin, Page and Thiel, moved roughly $540 billion out of reach, about 30% of the state's billionaire wealth. The same study estimated Prop. 40 would raise closer to $30 billion rather than $100 billion. On the other side, Nobel laureates Daron Acemoglu of MIT and Joseph Stiglitz of Columbia signed an open letter arguing California pulled in more venture funding after the measure was introduced, and noting that from 2019 to 2025 billionaires paid income tax equal to just 1.6% of their $1.4 trillion wealth gain.

Supporters pitched the tax as a fix for federal healthcare cuts made in 2025 under H.R. 1, the law known as the One Big Beautiful Bill Act, saying the money would shield hospitals, emergency rooms, clinics and Medi-Cal. Not every billionaire balked. Nvidia CEO Jensen Huang, worth an estimated $200 billion, told CBS News he was fine with it: “I don't mind paying taxes; the more you make, the more taxes you pay, so I'm okay with that. I don't like tax dollars wasted. But I also support all that this country represents.”