California’s Proposition 40 would impose a one-time 5% levy on billionaires who were state residents on Jan. 1, 2026, putting public service funding and future tax revenue before voters Nov. 3.
Payments would be due in 2027. Ninety percent of proceeds would go to health care, with the remaining 10% allocated to education, food assistance and tax administration.
The California Legislative Analyst’s Office (LAO) projects tens of billions of dollars in temporary revenue. It estimates that departures and other responses could reduce annual income-tax revenue by less than $1 billion.
Economists’ estimates differ. Jasper Boll, Emmanuel Saez and Gabriel Zucman estimate the tax could raise about $100 billion, with comparatively small effects on income-tax revenue. Benjamin Jaros and Joshua Rauh estimate collections of $28 billion to $36 billion before accounting for changes in other tax bases. Their model includes income-tax losses associated with billionaire departures and calculates a negative net present value of $38.9 billion for the state. EconoTimes previously examined Jaros and Rauh’s projected net loss.
The estimates differ in how they weigh the one-time proceeds against possible effects on other tax revenue. In an Oct. 27 analysis for The Guardian, columnist Eduardo Porter argued that the measure could help finance public services and address concerns about fairness in the tax system. Porter reported that Gov. Gavin Newsom and California gubernatorial candidate Xavier Becerra oppose the proposal over concerns that wealthy residents could leave. He also cited past billionaire migration after state estate-tax changes.
The LAO says Proposition 40 could be prevented from taking effect if Proposition 41 or Proposition 42 receives more yes votes. The scheduled decision is Nov. 3.
