California Voters Reject Proposed Billionaire Wealth Tax in Midterm Vote
Opponents spent nearly $400 million to defeat Proposition 40, a move that could influence the next Democratic presidential primary.
By Alina Marshall ·
California voters defeated Proposition 40, a proposed one-time tax on individuals with wealth exceeding $1 billion, during the November midterms. The Associated Press confirmed the results late Monday, marking a setback for a policy that had gained traction among some progressive Democrats.
The measure failed despite a strong performance by Democrats in other races nationwide. Opponents of the tax raised and spent almost $400 million, including funds for competing ballot measures, creating one of the most expensive ballot fights in history. Gabriel Zucman, an economist at UC Berkeley who supports wealth taxes, attributed the defeat to this spending gap. He noted that opponents spent more than $300 million on advertising while the pro-tax side spent negligible sums, leaving voters exposed primarily to anti-tax arguments.
Joshua Rauh, a Stanford economist and critic of the proposal, offered a different explanation. He pointed to voting patterns in the Bay Area, where support for Proposition 40 lagged significantly behind support for Kamala Harris in the 2024 presidential election. Rauh argued that voters in counties with high concentrations of wealthy residents were more skeptical of the tax. He wrote that these residents likely have closer contact with billionaires and their businesses, making them more hesitant to support a new levy.
The proposal also faced resistance from traditional Democratic allies due to its specific structure. Proposition 40 designated 90% of its projected revenue for health care and only 10% for food assistance and education programs. The California Teachers Association, a powerful labor union, opposed the measure, arguing it failed to provide sustainable funding for public schools. Additionally, Governor Gavin Newsom opposed the state-level tax, arguing that wealth is mobile and that a federal approach would be more effective at preventing billionaires from moving to other states.
The defeat leaves the future of wealth taxation in the United States uncertain. Zucman expects the issue to remain central in the new Congress, noting that many newly elected Democratic senators campaigned on curbing billionaire influence. Rauh anticipates further proposals but sees limited chances of passage while Donald Trump holds the White House. He believes the 2028 election will better reveal public appetite for such taxes.
Legal scholars also debate the constitutionality of a federal wealth tax. Rauh argues that a wealth tax would be classified as a direct tax, subject to constitutional rules requiring revenue shares to match state population shares. This rule, rooted in 18th-century compromises regarding slavery and land, was exempted for income taxes by the 16th Amendment but not explicitly for wealth taxes. Whether the Supreme Court would uphold a federal wealth tax under this framework remains a point of contention among legal experts.
