During the November 3, 2026 election, California voters rejected Proposition 40, the “2026 Billionaire Tax Act” (the Billionaire Tax Initiative). The Billionaire Tax Initiative, which generally targeted ultra-high-net worth Californians, would have imposed a 5% tax on the net worth of California residents and non-exempt trusts holding more than $1 billion in assets. Every California resident would have been required to file a declaration of their net worth with the California Franchise Tax Board.
The Billionaire Tax Initiative had been proposed by the Service Employees International Union-United Healthcare Workers West. With the initiative defeated, neither the tax nor the reporting requirement will take effect.
At the same time, voters passed Proposition 42 to prohibit the state from taxing certain financial assets or other personal property and to limit the state’s ability to impose retroactive taxes. Proposition 42’s prohibition of state personal property taxes adds an additional hurdle in the event that a similar California wealth tax is proposed in the future. Voters also passed Proposition 3 to permanently extend the higher tax rates on higher earners which was set to expire.
Voters rejected Proposition 41, which would have undermined Proposition 40 and prohibited the enforcement of taxes that are exempted or excluded from the state spending limit, and Proposition 43, which would have increased the minimum percentage of votes needed to approve local special taxes from a simple majority to a two-thirds majority.
States may continue to consider these types of wealth taxes on high-net-worth individuals, although they are criticized for discouraging in-state investment and pushing wealthy taxpayers to leave the state. If enacted, such novel taxes are expected to involve significant constitutional challenges.
