Californians have voted down a proposal to impose a one-off levy on the state's billionaires, according to projections from US broadcasters on Monday. The measure, known as Proposition 40, would have required roughly 200 of the state's wealthiest residents to pay 5% of their total net worth, with most of the revenue earmarked for public healthcare.
CNN and CBS News both called the result almost a week after polling day, reflecting California's notoriously slow vote-counting process. With about 60% of ballots counted on Wednesday, the "No" side led by 55.6% to 44.4%, and the outcome has now been confirmed.
The vote was closely watched by supporters of wealth taxes as a bellwether for global efforts to address widening inequality. California, if it were a sovereign nation, would rank as the world's fourth-largest economy, yet its internal wealth gap is among the most pronounced in the United States.
A test for wealth taxation
Campaigners estimated that the tax would have raised around $100 billion, funds that would have flowed into the state's public healthcare system, which has been strained by federal budget cuts. The proposal was part of a broader push by economists and activists to use taxation as a tool to curb the concentration of wealth.
Joseph Stiglitz, the Nobel Prize-winning economist, issued a statement through the International Capital Tax Commission before the projections were released. "Significant changes rarely move in a straight line," he said. "Prop 40 put a tax on billionaire wealth on the ballot in the United States for the first time."
The defeat is a blow to those who hoped that California, with its progressive reputation, would become a testing ground for wealth taxes. Similar proposals have been debated in several European countries, where governments are also grappling with how to address inequality without driving away high-net-worth individuals.
Fears of a billionaire exodus
Opponents, including Google co-founder Sergey Brin, spent hundreds of millions of dollars to defeat the measure. Their campaign centered on the argument that the tax would drive the super-rich out of California, eroding the state's future tax base. In the weeks before the vote, television adverts warned that billionaires would relocate to lower-tax states or countries, taking their wealth and job creation with them.
Gavin Newsom, the outgoing governor, had said he would vote against the measure. Newsom is widely expected to run for the White House in 2028, and his opposition may have influenced moderate voters.
The result comes amid a broader political realignment in the United States. Last week's midterm elections brought sweeping gains for the Democrats and heavy losses for President Donald Trump's Republicans. The outcome in California, however, suggests that even in a progressive stronghold, voters are wary of punitive taxation on the ultra-wealthy.
For European observers, the California vote offers a cautionary tale. Several EU member states have considered or implemented wealth taxes, with mixed results. France's impôt de solidarité sur la fortune was replaced by a tax on real estate in 2018 after critics argued it drove entrepreneurs abroad. Spain, meanwhile, introduced a temporary "solidarity tax" on large fortunes in 2022, which has faced legal challenges.
The debate over wealth taxation is likely to continue, both in the United States and in Europe. As Stiglitz noted, significant changes rarely move in a straight line. The California vote may be a setback, but it is unlikely to end the conversation about how to address the growing gap between the richest and the rest.
