Despite a nationwide blue wave during the midterm elections, California’s highly controversial billionaire tax did not receive the support many expected in one of the country’s most liberal states.
Since the Golden State’s powerful health care union proposed the new tax, proponents of Proposition 40 have faced a fierce and costly battle against the world’s richest people.
In what has been described as a David versus Goliath fight, the underdog appears to have lost. The proposal, which would have imposed a one-time 5% tax on the assets of California billionaires to primarily fund health care, appeared poised to be defeated as votes were counted Wednesday.
“In a very blue state like California, most voters are going to support additional funding for health care, especially to replace Trump’s budget cuts. But in retrospect, the sponsors might wish they had been a little less ambitious,” said Dan Schnur, a professor of politics and communications at USC, UC Berkeley and Pepperdine.
Nearly 56% of California voters rejected the proposition while 44% voted for Proposition 40. However, with approximately 6 million votes remaining to be counted, the results are still too close to call.
The battle over the billionaires tax was one of the costliest electoral fights in California history, sparking a debate over wealth inequality and the taxation of the ultra-rich. He also highlighted how billionaires have wielded greater influence in politics.
Well-known politicians such as U.S. Sen. Bernie Sanders (I-Vt.), the California Democratic Party, medical professionals, and Hollywood celebrities including actor Mark Ruffalo have supported the wealth tax. But the idea has drawn opposition from California Gov. Gavin Newsom, the teachers union, Planned Parenthood, business groups and others who have expressed fears that billionaires will flee the state.
The state’s next governor, Xavier Becerra, who was just elected, also opposed the tax.
Although California’s $4.25 trillion economy remains a global powerhouse and a major draw for AI and aerospace investments, thousands of companies have moved to Texas and other states in recent years due to falling costs.
Opponents of the wealth tax have vastly outspent proponents of Proposition 40, flooding televisions, radio, social media and smartphones with ads. Their message: The wealth tax is a reckless experiment and a tax on everyone, not just billionaires.
Brian Galle, a law professor at UC Berkeley who helped write the wealth tax proposal, said it’s difficult to “fix a broken system” and communicate the facts to people when they’re up against the ultra-rich. Billionaires also own media and social media companies, megaphones that help spread political messages.
“When billionaires have half a dozen different strategies to buy this election, it shows they already have too much money and they’re not paying back enough,” he said.
Support for the proposal to denigrate billionaires had already begun to wane in recent months.
A poll by the UC Berkeley Institute for Government Studies, co-sponsored by the Los Angeles Times and released last week, showed that voter support for Proposition 40 had fallen to 42 percent of voters surveyed last month, from 48 percent in August.
The measure may also have lost fans because taxing assets rather than income can be a complicated and confusing process and raises concerns even among non-billionaires about whether they want to allow the state to start demanding a share of the value of things they own.
Whatever the outcome, Proposition 40 also fueled a debate that will continue over taxing billionaires, Galle said.
As of Wednesday afternoon, about $489 million had been raised to support and oppose Proposition 40 as well as two ballot measures — Propositions 41 and 42 — that could block the wealth tax, according to data from the California Secretary of State.
The vast majority of this funding, more than $380 million, was used to eliminate the billionaire tax. Wealth tax supporters, including the Service Employees International Union-United Healthcare Workers West, were far behind, contributing about $100 million, according to filings with the California secretary of state.
Billionaires like Google co-founder Sergey Brin have contributed millions to a group called Building a Better California, which has funded ads against the wealth tax and proposals that could block it.
Money doesn’t always win an election, but a large funding imbalance is difficult to overcome, Schnur said.
“As important as money was to defeating Proposition 40, the coalition against it could have been just as important. You didn’t see Sergey. You didn’t see tech billionaires in the ads. You saw teachers and nurses and firefighters,” he said.
The four richest Californians – Brin, Nvidia CEO Jensen Huang; Google co-founder Larry Page and Meta chief executive Mark Zuckerberg would owe 40% of the estimated billionaires’ tax levies, according to a report. THERE Time analysis.
Before the election, billionaires took steps to prepare for this possible tax. Zuckerberg expressed concerns that if he were to sell his shares to pay the tax, it could reduce his control over the company, but Meta’s board reached a deal to address that fear.
The billionaires’ tax proposal also faced other major obstacles. Proposition 42, which could have blocked the billionaire tax, was on track to pass. It would prohibit new taxes on “retirement assets, individually owned assets, and other forms of personal savings” and ban retroactive taxes.
“They didn’t just reject a single bad tax idea: Millions of Californians supported the strongest protections available to protect their hard-earned savings from double taxation. They joined firefighters, law enforcement officers, construction workers, seniors, veterans and small businesses,” said Proposition 42 spokesman Nathan Click.
On the other hand, Proposition 41 – a proposal that would have required audits for new special state taxes and also could have blocked the billionaires tax – was on the verge of defeat.
Proponents of Proposition 40 tried to convince voters that taxing about 200 billionaires was the solution to raising the $100 billion needed to offset federal health care budget cuts.
This week, proponents of the wealth tax emphasized how high the stakes are. People won’t be able to afford health coverage, children will die and hospitals will close, they said, if California lawmakers don’t find a way to get more funding.
“If Sacramento fails to protect patients and deliver a real solution that requires billionaires to pay their fair share, health care workers will pursue every avenue available, up to and including returning to elections in 2028 with a billionaires tax,” said SEIU-UHW Chief of Staff Suzanne Jimenez.
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