Even Californians Rejected a Billionaire’s Tax
SACRAMENTO — Before you worry that some of the nuttier ideas from the Democratic Socialists of America will instantly take root across the country, be sure to consider California, where those viewpoints would presumably be more popular than in most other parts of the nation.
Yet on Tuesday, voters soundly rejected one of the most DSA-ish proposals that was floated on any ballot anywhere: a one-time billionaires’ tax, with proceeds mostly funding public healthcare. It flopped in a state where bashing billionaires is as popular as rooting for the San Francisco 49ers. There’s still all the usual slow counting left, but the margin likely is far too large to overcome.
Proposition 40 was led by a prominent union, SEIU-UHW, and backed by the California Democratic Party, the Democratic Socialists of America, a variety of other unions, Bernie Sanders and progressive U.S. Rep. Ro Khanna (D-San Jose). Given how much it costs to place a measure on the statewide ballot, this involved serious effort in an election driven by a blue wave. (RELATED: France Should Export a Warning, Not Its Tax Ideas)
And it was pitched with all the usual left-wing gusto: “Of course these billionaires and their puppets don’t want a billionaire tax, but you should — because someone has to pay, and working people are already paying enough for healthcare,” backers explained in their official ballot argument. As of the latest counting, however, it was losing decisively, 56 percent to 44 percent. Even in lefty San Francisco, Prop. 40 was ahead by only four percentage points.
Despite the largest Democratic wave election we’ve seen in many years, the state’s Democratic-leaning electorate resoundingly said “no” to eating the rich.
It would have imposed a one-time 5 percent tax on every billionaire’s net worth, excluding real estate, retirement funds and pensions. “The state would decide how and when to spend the money from the wealth tax, but it would have to be spent on certain types of services,” as the nonpartisan Legislative Analyst’s Office explained. While it could bring in tens of billions of dollars, the LAO noted, the tax would also possibly lead to a decrease in state income-tax revenues if wealthy people fled the state. (RELATED: What’s Behind the Wild New Wealth Tax Proposals?)
It’s clear some of these billionaires had already made that choice before the election. The tax applies retroactively — to anyone who was a resident as of Jan. 1, 2026 — but that portion of the measure was legally dubious and almost certainly would be challenged. And any politically savvy person knows how often temporary taxes are extended and become permanent. California’s highly progressive income tax system cannot afford losing its wealthiest residents. (RELATED: The Wealth Tax Endgame)
That clearly explains why even Gov. Gavin Newsom, who is likely to run for president in a primary that presumably requires DSA support, strongly opposed the proposition. “I don’t think it’s a good idea to do [it] at a state level. It’s a badly written initiative. It focuses just on one part of the state’s budget. It’s one-time money and the impact is already being felt. People have left the state,” the governor said, per Fox News.
Newsom also backed the defensive measure, Proposition 42. Currently leading, 54 percent to 46 percent, it would have negated Prop. 40 had it passed (provided Prop. 42 received a higher vote share than Prop. 40) and is poised to prohibit such nonsense in the future.
According to its official summary, Prop. 42, “Prohibits any new state tax (1) imposed on the ownership of personal property (all things people own other than real estate), or (2) that applies retroactively based on taxpayer’s past activities. Nullifies taxes enacted after January 1, 2026 that conflict with this measure.”
California dodged a bullet, although I never expected the billionaire’s tax to gain traction. As I’ve noted on these pages before, Californians generally vote in a more conservative direction on ballot measures than they do with their candidate choices. (READ MORE: Direct Democracy and Its Complications)
The statewide candidate elections went mostly as expected. The usual variety of Democrats won congressional races after the state egregiously redistricted its seats in response to Texas’s poorly conceived “dummymander.” Democrat Xavier Becerra, the uninspiring former state attorney general and Biden administration official, won by expectedly large margins over Republican Steve Hilton, who never had any serious chance. Most of the statewide Democratic candidates won by the 65-to-35 percent margins that are commonplace.
The only real suggestion of a DSA shift came in the race for insurance commissioner, where Jane Kim is in the lead over legislator Ben Allen. She wants to create a publicly run disaster insurance program that would muck up the state’s otherwise noteworthy recent efforts to shore up its insurance system. With the other initiatives, voters rejected an ill-fated Voter ID proposal (Proposition 39) and, sadly, rejected efforts to reform our environmental regulatory process (Proposition 45) and place limits on the ability of local governments to raise special taxes (Proposition 43).
My guess is that when faced with a laundry list of complicated measures, voters tend to vote “no” more often than “yes” unless the measures somehow stick in their mind. Prop. 40 certainly did that given the massive news coverage, as did Prop. 42 because of Newsom’s public efforts to support it. Despite the largest Democratic wave election we’ve seen in many years, the state’s Democratic-leaning electorate resoundingly said “no” to eating the rich.
My hopeful take: If Democrats think that a DSA agenda will play well in America, they better think twice, as it doesn’t play that well in California.
READ MORE from Steven Greenhut:
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Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.