Billionaire Tax Measure Fails In California

SACRAMENTO, California — California rejected a historic wealth tax after a bruising and expensive campaign that bitterly split the state’s Democratic coalition, according to The Associated Press.

The result vindicates Gov. Gavin Newsom and powerful allies who rallied against the measure, arguing it would do more harm than good by weakening California’s economy and undercutting its tax base, and dealt a stinging setback to progressives who have pushed Democrats to embrace a more muscular economic agenda. Its defeat in deep-blue California will likely dampen enthusiasm for pursuing similar taxes in other states or in Congress.

The ballot measure, which would have imposed a one-time, 5% tax on billionaires’ assets to offset federal health care cuts, has roiled California politics for months, dividing organized labor and crystallizing a broader debate over the Democratic Party’s economic agenda.

Proposition 40 faced a steep path to victory. The health care union pushing the measure, SEIU-UHW, was overwhelmingly outspent by billionaire opponents — led by Google co-founder Sergey Brin — who poured hundreds of millions of dollars into defeating the tax.

And much of California’s political establishment followed Newsom’s lead by closing ranks against the measure. Voters were bombarded with billionaire-funded ads warning the tax would imperil California’s economy and citing opposition from Newsom and Democratic allies like Planned Parenthood and the California Teachers Association.

That opposition overwhelmed a largely volunteer-driven effort that relied on labor organizing and the credibility of key endorsers like the California Democratic Party, the California Labor Federation, and Sen. Bernie Sanders, who traveled to California to campaign for Prop 40.

The proposal galvanized Silicon Valley luminaries like Brin who had previously stayed largely on the sidelines of state politics. Incensed by what they saw as an assault on California’s innovation economy, they spent enormous sums to halt Prop 40 and elevate centrist Democrats to the Legislature and the governor’s office.

The billionaires didn't just spend against Prop 40. They also bankrolled multiple insurance policy ballot initiatives to invalidate the wealth tax if it passed — one of which, Proposition 42, would also ban future wealth taxes. Prop 42 was leading as of Monday evening.

Wealth tax proponents faulted the influx of billionaire money for swamping their initiative and misleading voters. And despite their loss, they vowed to press ahead with efforts to bolster health care by taxing the ultra-rich.

"If Sacramento fails to deliver a real solution to the healthcare crisis instigated by the one big bill, one that actually makes billionaires pay their fair share, then California's healthcare workers intend to be back on the ballot in 2028 to correct the damage," SEIU-UHW leader Dave Regan told reporters on Election Day. "That's not a hypothetical. That is our plan."