California voters to decide on 'world's first' tax on billionaires

California voters are set to decide on Proposition 40, a groundbreaking ballot measure that proposes a one-time 5% tax on the accumulated worldwide wealth of the state's billionaires. The "2026 Billionaire Tax Act" targets approximately 200-250 California residents and trusts with a net worth exceeding $1 billion, as determined on December 31, 2026. This tax, if approved, would apply to individuals who were California residents as of January 1, 2026, with payments due in 2027, though taxpayers could opt for five annual installments with an added deferral charge.

Sponsored by the Service Employees International Union-United Healthcare Workers West, the initiative aims to generate tens of billions of dollars, potentially up to $100 billion over five years. The revenue is primarily earmarked for state healthcare programs (90%), with the remainder allocated to food assistance and public education, in part to offset federal funding reductions.

However, the proposal faces opposition due to concerns about its potential impact, including arguments that it could prompt wealthy residents to leave the state, possibly resulting in long-term income tax revenue losses. Critics also raise questions about constitutional challenges, particularly regarding the retroactive application and the accuracy of wealth valuation. Voters will also consider two other ballot measures, Propositions 41 and 42, which, if passed with more votes than Proposition 40, could effectively nullify the billionaire tax.