California voters have rejected Proposition 40, a first-in-the-nation tax on the net worth of billionaires, ending the nation's biggest test yet of a long-held progressive idea.
The "no" side raised roughly ten times as much as the "yes" side, with Google co-founder Sergey Brin alone giving more than $100 million to the campaign against it.
Buying an election is not the same as winning the debate.
Supporters say they could put a wealth tax back on the ballot in 2028, and they've started running ads criticizing Gov. Gavin Newsom's opposition in early primary states.
California Voters Turn Down the Billionaire Tax
California voters have rejected Proposition 40, a first-in-the-nation tax on the net worth of billionaires. The ballot fight was bitter and drew huge spending from some well-known tech leaders who wanted to stop the tax.
The Associated Press determined on Monday that the "no" side had enough votes to win. Most Californians vote by mail, and ballots postmarked by Election Day can arrive up to a week later, so close races can take days or weeks.
The measure would have created a one-time 5% tax on the wealth of Californians whose net worth tops $1 billion. Most of it would have helped replace federal cuts to healthcare, with 10% going to education and food aid.
Supporters, including SEIU United Healthcare Workers West, said the money was needed to make up for an estimated $100 billion the state will lose in federal healthcare funding over five years, and patients would suffer.
Opponents argued the tax would push the ultrawealthy to leave. The result is a win for Democratic leaders who opposed it, including Gov. Gavin Newsom, who may run for president in 2028, and a loss for a progressive idea.
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A Lopsided Money Fight
The "no" side raised roughly ten times as much as the "yes" side. Google co-founder Sergey Brin alone put more than $100 million into a political action committee working to defeat the measure.
That committee, Building a Better California, also backed other ballot measures designed to cancel out the tax. It raised more than $333 million in total, and nearly a third of that came from Brin.
Brin and fellow Google co-founder Larry Page were among the billionaires who began cutting ties with California in anticipation of the tax. Mark Zuckerberg said he would stay for eight years and made a deal with Meta to help pay the tax without giving up his ownership stake.
Supporters of the measure were blunt about the spending. Their statement said buying an election is not the same as winning the debate, and they called the vote only round one.
Who Voted Which Way
The AP Voter Poll shows a clear age divide. Most California voters under 30 backed Proposition 40, while about 7 in 10 voters aged 65 and older voted against it.
Income mattered too. About half of voters in households earning under $100,000 a year said they supported it, but closer to 6 in 10 voters with incomes of $100,000 or more were opposed.
The measure was the nation's biggest test so far of a progressive idea: tax the ultra-rich on their investments, the main way they earn money, rather than on paychecks. Sen. Bernie Sanders rallied in California cities in the closing weeks to urge a yes vote.
Robert Swonger, an independent and auto glass technician near Sacramento, said before voting ended that he'd like billionaires to have less money, but doesn't believe taxing them out of existence will work.
Democrats Split Over the Tax
Some usual Democratic allies joined the opposition, including Planned Parenthood and the California Medical Association. They worried about how the revenue would be divided and what a mass exodus of wealthy taxpayers might do to the state budget, which leans heavily on the income tax paid by the richest residents.
In a statement, the coalition called Proposition 40 a reckless experiment on the state's economy, conducted with little regard for the harm it would cause.
Newsom says a California wealth tax would put the state at a disadvantage, but he supports a national minimum tax on anyone with a net worth above $100 million. Days before Sanders held his rallies, he told reporters the senator's focus on inequality was spot-on, but that on this issue they fundamentally disagree.
Sanders and Massachusetts Sen. Elizabeth Warren have long backed a federal wealth tax, so the vote highlights a divide within the party over where and how to go after great wealth.
What Happens Next
The "Yes on 40" campaign says the measure aimed to protect healthcare for Californians, and it will put a tax back on the ballot in 2028 if patients are not protected.
Supporters have already started running ads criticizing Newsom's opposition in New Hampshire, New Mexico and Virginia, states that vote early in the 2028 Democratic presidential primary.
That puts the issue on a path into national politics. Newsom, who may run for president, now has a win at home but also a continuing argument with the party's progressive wing.
For now, California's biggest fortunes remain untouched by a wealth tax, and the debate over how to pay for lost federal healthcare funding is far from over.
Read more in our Politics section for similar stories and expert analysis.
Charlotte Reynolds
Political Journalist
Charlotte Reynolds is a political journalist with years of experience covering Congress, federal policies, elections, and political strategy. She provides in-depth analysis and commentary on national issues.
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