The 2026 Billionaire Tax Act is dominating airwaves this election season as Californians get ready to vote on the nation’s first wealth tax.
Also known as the Billionaire Tax, Proposition 40 creates a one-time 5% wealth tax on taxpayers with over $1 billion in assets. 90% of the revenue will be spent on public healthcare and the other 10% on education, food assistance and administrating the tax.
This tax affects the roughly 250 billionaires who hold a collective $2.4 trillion in wealth. As of Sept. 28, it is expected to generate around $109 billion for California, according to California Billionaire Wealth Tracker.
The Legislative Analyst Office found the state tax would “probably” collect tens of billions of dollars from the wealth tax spread across several years, but that potential wealth flight could reduce state revenues by less than $1 billion per year.
The tax is retroactive, meaning it affects billionaires residing in California as of Jan. 1, 2026. According to the Institute on Taxation and Economic Policy, retroactive taxes are standard practice and the Supreme Court has approved this approach in previous matters. This element is threatened if Proposition 42 passes.
Directly held real estate, pensions and traditional retirement accounts are excluded. Roth accounts are excluded up to $10 million, as well as up to $5 million of art, cars and personal property.
Prop. 40 has been spearheaded by the healthcare union SEIU-UHW and is supported by Vermont Sen. Bernie Sanders, CA 17th District Rep. Ro Khanna, California Labor Federation, California Democratic Party and Teamsters CA.
According to Dave Regan, president of SEIU-UHW West, Prop. 40 is a direct response to H.R. 1, also known as President Trump’s Big Beautiful Bill.
The LAO projects that California could see an annual shortfall of $20 billion to $35 billion by the fiscal year 2027-2028 as a result of H.R. 1. Regan said Prop. 40 is the solution “to this problem that’s a freight train coming at us.”
“This is an incredibly modest and relatively speaking small tax against the gargantuan wealth held by these people, and it’s all to avert a public health catastrophe,” Regan said.
According to economists Emmanuel Saez of University of California, Berkeley, and Gabriel Zucman of the Paris School of Economics, California billionaires saw wealth increases of an average of over 15% per year and paid on average 0.26 of their wealth annually in state income taxes—accounting for 2.4% of California’s income tax revenue.
“The income tax is irrelevant to [billionaires],” Regan said. “The billionaire’s wealth does not come in the form of wages and salaries, and what we’ve seen in the last 10 to 20 years is this incredible accumulation of wealth, not income, but wealth concentrated at the very, very upper level of our state.”
Regan said this tax is intended to be a one-time “temporary bridge” while legislators figure out a long-term solution.
Support for the proposition is split among party lines. The San Francisco Democratic Party voted to oppose Prop. 40 against its state party. Gov. Gavin Newsom and gubernatorial candidates Xavier Becerra and Steve Hilton are also against the tax, along with CA 3rd District Rep. Kevin Kiley, California Professional Firefighters and the California Teachers Association.
Opponents say the one-time tax would not produce the long-term funding needed to counteract the effects of H.R. 1.
In a press release, CTA said it “determined that this policy will not provide the sustainable and long-lasting funding that our schools and communities deserve.”
Planned Parenthood Affiliates of California opposes Prop. 40, citing a lack of accountability and specificity on how funds would support patients and healthcare providers.
Its staffers launched their own campaign in favor of Prop. 40, signing a public letter to PPAC CEO Jodi Hicks, saying her “position stands in direct conflict with the mission and values this organization was created to uphold.”
According to a Truthdig investigation, 22 California billionaires, most notably Google co-founder Sergey Brin, have spent a combined $150 million to oppose the initiative and endorse Propositions 41 and 42, which could nullify Prop. 40 if all three pass. SEIU-UHW and other supporters have spent $36 million on the campaign.
