California billionaire tax rejected by voters

The California billionaire tax has been rejected by voters, according to projections from the Associated Press. Proposition 40 would have imposed a one-time 5% levy on residents worth more than $1 billion, but it was trailing by about 55.6% to 44.4% with roughly 60% of votes counted, Al Jazeera reported.

The defeat follows one of the most expensive ballot fights in the state's history, with some of Silicon Valley's richest figures funding the campaign against it and Governor Gavin Newsom also opposing the plan.

What Proposition 40 proposed

The measure was designed as a special, one-off wealth tax rather than an annual charge. Its main features were:

• A single 5% tax on the net worth of Californians with more than $1 billion
• Liability for anyone living in the state on January 1, 2026
• About $100 billion in expected revenue, according to Al Jazeera
• Most of the money aimed at healthcare, especially Medi-Cal, the state's Medicaid programme
• Smaller shares for education and food assistance

California has a little over 200 billionaires, TechCrunch noted. The proposal was drawn up with input from UC Berkeley economists Emmanuel Saez and Gabriel Zucman, who have long argued that the very richest pay too little relative to their wealth.

Who backed the California billionaire tax

Labour unions led the "yes" campaign, and US Senator Bernie Sanders became its most prominent national champion, presenting it as a model for tackling inequality across the country. Democrats who supported it said the money was needed to make up for federal funding cuts in President Donald Trump's spending law, known as the One Big Beautiful Bill.

Saez told TechCrunch before the vote that the state currently collects only around $3 billion a year from its billionaire class, roughly 1% of total revenue, even though artificial intelligence has fuelled a surge in wealth concentrated in a few companies and individuals.

Why opponents won

Newsom, who leaves office soon and is widely seen as a possible 2028 presidential contender, argued the tax would push wealthy founders and their companies out of California, taking income tax and jobs with them. Divisions among Democratic leaders and labour groups also eroded early support.

Money played a major role. Al Jazeera said billionaires including Google co-founder Sergey Brin spent more than a quarter of a billion dollars against the measure, while TechCrunch put the figure as high as $379 million. The AP reported that the "no" side raised around ten times as much as supporters.

Some founders also warned that paying a large tax on paper wealth could force them to sell shares and lose control of their companies. Saez rejected that, saying share structures could separate economic ownership from voting rights.

What it means after the midterms

The failure of the California billionaire tax is a setback for the left wing of the Democratic Party, which had gained momentum after the midterm elections handed Democrats control of both chambers of Congress. Readers can catch up on the wider picture in our coverage of the US midterm results and what the midterm defeat means for Trump.

The debate over taxing the ultra-rich is far from over. Incoming Senate Finance Committee chairman Ron Wyden said in a November 4 statement that his committee would redouble efforts to make billionaires pay their fair share. Backers of Proposition 40 have also said they may bring a similar measure back to the ballot in 2028, the AP reported.

Corporate tax arrangements are under scrutiny around the world too, as shown by reports that Apple's tax savings in Singapore now top Ireland. For Asian investors and tech firms watching Silicon Valley, the vote suggests that even in a strongly Democratic state, wealth taxes remain a hard sell when the wealthy fund the opposition.

Full details were reported by Al Jazeera, with additional reporting from TechCrunch.

Image: The California State Capitol in Sacramento, where the California billionaire tax debate played out. Photo by Santosh7700 via Wikimedia Commons, CC BY-SA 4.0.