California had one job. In the bluest state in the union, during a midterm where Democrats ran the table nationally, voters got to decide whether roughly 200 billionaires should pay a one-time 5% tax on their fortunes to keep hospitals and clinics open. They said no. Prop 40 lost 52.8% to 47.2%, and the Associated Press called it on November 9 [1][2].
Then they went further. Voters appear to have approved Prop 42, a constitutional ban on wealth taxes written and paid for by the same billionaires [3]. So the door didn’t just close. Somebody bolted it.
This is why we can’t have nice things. The money exists. It’s sitting in about 250 brokerage accounts. California just voted to leave it there.
| The short version | The receipt |
|---|---|
| Prop 40 (billionaire tax) | Failed, 47.2% Yes to 52.8% No [1] |
| Prop 42 (wealth tax ban) | Winning, written and funded by the opposition [3] |
| Prop 3 (permanent high-earner income tax) | Passed [9] |
| Spending | $378.4M against, $33.5M for [1] |
| Hardest No votes | Central Valley, Inland Empire, rural north [15][16] |
| Governor Newsom | Opposed 40, endorsed 42 [7] |
What Prop 40 Actually Asked For
Here’s the radical communist plot. Anyone worth more than $1 billion who lived in California on January 1, 2026, would pay a one-time state tax equal to 5% of their net worth [4]. They could spread it over five years. Primary homes, pensions, and most retirement accounts were mostly excluded. Ninety percent of the money was earmarked for health care, with the rest going to education and food assistance [4].
Once. Five percent. One time. Supporters projected about $100 billion. The nonpartisan Legislative Analyst’s Office was more cautious, calling it a temporary gain of “tens of billions of dollars” spread over several years, with a possible ongoing dip in income tax revenue if billionaires left [4]. Either number would have gone a long way in a state facing a fourth straight year of budget deficits while federal Medicaid cuts land on top [3].
Now look at what these people currently pay. Economists Boll, Saez, and Zucman estimate California’s roughly 250 billionaires held $2.3 trillion as of July 2026 [5]. That’s about half the state’s projected GDP sitting with a few hundred people. Their state income tax works out to around 0.2% of their wealth per year, because fortunes built on stock don’t get taxed until somebody sells [5].
Former Stripe engineer Saikat Chakrabarti did the math in public. The poorest billionaire in California will make about $300 million this year. Under Prop 40, he'd have made about $235 million [6]. Pour one out.
The Poison Pills
The billionaires didn’t just fight Prop 40. They wrote their own propositions to kill it from the inside. California law says that if two conflicting measures pass, the one with more Yes votes wins. So the opposition committee, Building a Better California, put two countermeasures on the same ballot [3][11].
| Measure | What it does | Who wanted it | Result |
|---|---|---|---|
| Prop 40 | One-time 5% tax on billionaire wealth, 90% to health care | SEIU-UHW, nurses, Teamsters, CA Democratic Party | Failed [1] |
| Prop 41 | Blocks new taxes from sitting outside the state spending cap, the exact structure Prop 40 used | Building a Better California | Failed, 45.6% Yes [8] |
| Prop 42 | Constitutional ban on new taxes on financial assets and business holdings, plus most retroactive taxes | Building a Better California, police and fire unions, Newsom | Winning [3] |
| Prop 3 | Makes the existing 10.3% to 12.3% income tax on top earners permanent | California Teachers Association | Passed [9] |
Prop 42 got sold as protecting your pension and your 401(k). Prop 40 never touched normal retirement savings. The only retirement accounts it reached were Roth IRAs holding more than $10 million [3]. If that’s you, congratulations, and also you’re not reading this blog. The $159 million behind Prop 42 came primarily from billionaires, and California’s public safety unions fronted the ads [3].
Gavin Newsom endorsed it anyway [7]. The governor who says he wants a national billionaire tax helped write a ban on a state one into the California Constitution.
Senate Budget Chair John Laird said he never imagined a scenario where Prop 42, built only to cancel the billionaire tax, would pass on its own [3].
Paychecks yes, fortunes no
Here’s the part the “California is a socialist hellhole” crowd will pounce on. Voters did pass Prop 3, which locks in the top income tax rates on high earners permanently [9]. Even Building a Better California endorsed it [17]. So California will tax a surgeon’s salary. It will tax a lawyer’s bonus.
What it won’t touch is the stock pile that grows untaxed until the day somebody dies. Rich people’s paychecks are fair game. Their fortunes just got constitutional protection.
Follow the Money
Supporters raised $33.5 million, almost all of it from one healthcare workers’ union. Opponents raised $378.4 million [1]. That works out to roughly $64 spent per No vote and about $6 per Yes vote, using AP’s vote count [2].
Google co-founder Sergey Brin gave $102 million personally [10]. He’s no longer a California resident, and he still bankrolled more of this fight than the entire Yes side put together times three. His committee raised $333 million in total [11]. The top checks, from campaign finance filings [11]:
- Sergey Brin, $102.0M
- Eric Schmidt, $40.2M
- John Doerr, $40.0M
- Patrick Collison, $33.2M
- Vinod Khosla, $12.6M
- Chris Larsen, $12.5M
In late October, opponents were outspending supporters on ads by 250 to 1 [12]. The main message was that Prop 40 was a “Trojan horse” lawmakers would expand to tax everybody. CalMatters’ fact check called that largely misleading, because Prop 40 wrote its billionaire threshold into the state Constitution [14].
“Anyone who lives in California has been carpet-bombed by a deluge of ads,” said UC Berkeley economist Gabriel Zucman [13].
Stanford’s Joshua Rauh, a Prop 40 critic, argues the ads weren’t decisive, since the biggest defections relative to Kamala Harris’s 2024 vote came in Bay Area counties full of people who work for billionaires [13]. That’s a fair point. Santa Clara, San Mateo, and Marin all voted No too [21]. It also isn’t comforting. The people closest to the money voted to protect it, and the people furthest from it voted with them.
The Valley Voted Against Its Own Medi-Cal
Prop 40 won a majority in only nine of California’s 58 counties. All of them sit on or near the coast [16]. Los Angeles, San Francisco, and Alameda carried it with 54% to 56%. The Central Valley gave it 40% or less in several counties [17].
Now look at who depends on the program Prop 40 was built to fund. More than half the residents of Fresno, Tulare, Merced, Kern, and Madera counties are on Medi-Cal [18]. Tulare leads the state at about 62%. Fresno has more than half a million people enrolled [18].
| County | Prop 40 Yes (approx.) | Poverty rate | On Medi-Cal |
|---|---|---|---|
| Tulare | 37.8% | 17.9% | ~62% |
| Fresno | 38.7% | 18.3% | ~52% |
| Kern | 40.5% | 19.1% | Over 50% |
| Los Angeles | 55.0% | 13.7% | Lower |
The federal hammer is already swinging. Trump’s 2025 budget law cuts federal Medicaid money, and CalMatters reports those health cuts are expected to knock about 2 million Californians off insurance [20]. Prop 40 was the backfill. The counties with the most people on the chopping block voted hardest against the money that would have caught them.
Nobody in Tulare County was going to pay this tax. Not one farmworker, not one nurse’s aide, not one small-town Rotary president. The few hundred people who would have paid it mostly live in Atherton, Palo Alto, and Malibu, and some of them had already moved to Nevada and Florida [6]. The valley took a bullet for people who’d never set foot in Visalia.
Partisanship did a lot of the work
Interior California leans Republican, and the state GOP opposed Prop 40. Democrats couldn’t even agree among themselves, with the governor and the teachers’ union on the other side [7][13]. When your own team is arguing, the side with 250 times the ad money gets to finish the sentence.
The Tantrums
Now the chisme. Mark Zuckerberg told Meta in October that he was “evaluating relocating his primary residence outside California,” according to the company’s SEC filing [22]. The filing noted that any listing of his California real estate would be public and “inevitably noted and commented upon by company employees.” Meta’s board responded by creating an entirely new class of nonvoting stock he could sell to pay the tax without losing control of the company [22]. In exchange, he promised to stay in California for eight years.
Think about that. A publicly traded company restructured its share classes so its CEO wouldn’t move to Miami over a 5% bill. His estimated tax was about $12.4 billion on a $247 billion fortune [22]. He’d have walked away with roughly $235 billion. Poor guy.
| Billionaire | The tantrum |
|---|---|
| Mark Zuckerberg | Threatened to move, got a custom stock class instead [22] |
| Sergey Brin | Left the state, then spent $102M on its election [10] |
| Page, Brin, Musk, Thiel | Celebrated by investor Balaji Srinivasan for exiting "the failed state of California" [6] |
| David Sacks | Trump's AI czar posted "God bless Texas" on New Year's Eve [23] |
| Garry Tan, Y Combinator | Warned founders would stop coming to California [6] |
| Mike Solana, Founders Fund | Victory post on X, "Eat shit, communists." [6] |
That last one is real. A Peter Thiel lieutenant greeted the defeat of a one-time health care tax by calling Californians communists [6]. Classy as ever.
One billionaire broke ranks. Tom Steyer backed the tax and told Business Insider that the current system lets the ultra-rich “create gigantic fortunes without paying tax” [6]. He also had a message for the Democrats who opposed Prop 40 on technical grounds. If this wasn’t the way to skin the cat, he said, don’t come back and claim there’s no way at all [6].
What Happens Now
SEIU-UHW conceded and promised a rerun in 2028 if the Legislature doesn’t come up with something real. “That’s not a hypothetical,” union leader Dave Regan said. “That’s our plan.” [1]
They’ll have to go through Prop 42 first. It blocks any new wealth tax, whether it comes from lawmakers or a constitutional amendment, so the next attempt has to repeal it at the ballot box [3]. Labor Federation president Lorena Gonzalez says it’s “not set in stone,” and she’s right [3]. Voters can undo it. They’ll just be outspent again while they try.
Democrats hold supermajorities in both houses of the Legislature. Every time progressives have floated an asset tax since 2020, it has died in committee [3]. The billionaires didn’t need to buy this election to win the long game. They just needed to remind Sacramento who signs the checks.
In January, federal Medicaid work requirements start landing on California, and about 2 million people are expected to lose coverage [20]. A lot of them live in Fresno, Tulare, and Kern. And a man in Menlo Park will still have about $247 billion [22].
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