Silicon Valley rejected billionaire wealth tax when voters in Los Angeles and San Francisco wanted it
California is still counting votes for the 2026 election, but the controversial billionaire wealth tax appears poised to be defeated — with help from Silicon Valley.
Statewide, the “no” camp on Proposition 40 received 55% of the vote compared to 45% who voted “yes.” That breakdown is exactly how it played out in Santa Clara County, home to tech strongholds like Sunnyvale, Palo Alto, Cupertino and Mountain View.
The wealthy Bay Area enclave of Marin County, located just north of San Francisco, also came out against Proposition 40, as did San Mateo County, which lies just south of the city.
In contrast, 55% of San Francisco County voters were in favor of Proposition 40 and 45% against. This is despite being home to top AI startups OpenAI and Anthropic, which plan to go public soon and will create new millionaires and billionaires.
Of course, many of the AI giants’ employees and early investors live outside of San Francisco and likely voted based on their pocketbooks as Prop 40 sought to impose a one-time 5% tax on billionaires.
Opponents of the ballot measure warned that it was unlikely to remain a one-time levy, and the way it would have taxed private assets made founders fear they would have to sell their majority stakes in their companies.
This concern may have resonated particularly among Silicon Valley startups and venture capitalists who aren’t quite billionaires yet but aspire to be.
Fearing the possibility of a wealth tax, several billionaires have already fled California, including Google co-founder Sergey Brin, who helped fund the campaign to defeat Prop 40.
And since the state already relies heavily on the rich for its budget, it doesn’t take much to shake things up, which may have also weighed on voters’ minds.
The loss of just six billionaires significantly reduced estimates of the increase in revenue the wealth tax would have generated, while also reducing predictions of how much revenue California could generate in the future from the income tax.
Meanwhile, election results revealed a new division within the state. Los Angeles County voters favored Proposition 40, 53 percent to 47 percent.
Unlike Northern California, which is a technology hub at the forefront of AI, Southern California is an entertainment hub threatened by AI-generated content.
Along with the campaign against Proposition 40, opponents also pushed competing ballot measures intended to overturn the proposed billionaire wealth tax.
One of them leads the vote count. Proposition 42 would ban taxes on personal savings, assets and retirement assets.
This dovetailed with a key anti-Prop 40 message, that the billionaires tax could one day be expanded to include everyone else’s wealth as well.
But the defeat of Proposition 40 and Proposition 42’s ban on future wealth taxes doesn’t mean the problem goes away forever. In fact, even some of the opponents of the billionaires tax were against it because it was limited to one state and not a national levy that would be harder to dodge.
“A ‘no’ vote does not mean that similar measures will never be implemented,” Michael Feispor, a partner in EY’s private tax team, said in a statement. “Taxpayers who have been watching from the sidelines should take advantage of this window to review their residency, domicile and estate planning structures as they now have more time to plan. »
He added that wealthy Californians are already asking difficult questions about residency, and some are acting on them.
For those who remain in the state, wealth organization methods that avoid high estate taxes, such as irrevocable trusts, are becoming increasingly important.
“The question is not whether this type of tax or something similar will come back, but whether taxpayers are willing to do it,” Feispor said. “Regardless of the outcome, this tax debate is not over and has increased the importance of long-term planning for individuals and families. »
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