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California voters rejected a proposed one-time 5% tax on billionaire wealth, turning back a measure supporters said could raise tens of billions of dollars for healthcare. The tax would have applied to people who were California residents on Jan. 1, 2026, with payments spread over five years.
The defeat came as some of the state’s wealthiest residents warned they could leave California over the proposal. The state has one of the nation’s largest billionaire populations and relies heavily on high earners to fund its budget, making the potential loss of additional wealthy residents a concern for state finances.
Supporters, including Sen. Bernie Sanders, I-Vt., and the Service Employees International Union–United Healthcare Workers West, said the tax could help offset Trump administration cuts to healthcare and food assistance. California Gov. Gavin Newsom opposed the tax, arguing that California should address wealth inequality without driving billionaires out of the state.
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Voters were also weighing Proposition 42, a separate measure backed by tech billionaires to block new taxes on personal property. It was leading, and approval could make future efforts to tax billionaire wealth harder, though supporters have vowed to keep pushing.
Wayne Winegarden, a senior fellow in business and economics at the Pacific Research Institute, said concerns that the tax could expand beyond billionaires and drive wealthy residents away may have hurt its support.
“A lot of messaging went around this: ‘You’re next.’ And I think that messaging resonated with people. This is most likely not a one-time tax. It’s not going to just stick to billionaires,” he said.
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Winegarden said voters may also have feared that billionaire departures would leave less money for the state budget.
“People were nervous that you’re going to lose money off of this because of billionaires leaving. The macroeconomic impacts of the wealth tax meant that the rest of the budget was going to have less money. I think that message got out there, and I think that helped,” he said.
Winegarden said defeating the tax could halt departures tied to the proposal, but he argued California remains uncompetitive on taxes.
“Without the wealth tax, the continued bleeding from a wealth-tax perspective should stop. Now, California has been, from a tax-competitiveness perspective, very uncompetitive.”
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His comments point to broader concerns that California’s tax policies could push wealth and investment elsewhere. The state is already losing taxpayers to other states.
Los Angeles County, home to Hollywood and one of the nation’s largest economic engines, led the country in taxpayer losses. A net 17,496 tax filers left for other states, taking nearly $1.9 billion in income with them.
The outflow extended beyond Los Angeles.
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Orange County recorded a net loss of 11,618 tax filers, followed by San Diego County with 9,401, Riverside County with 8,968 and San Bernardino County with 8,462.
The vote ended the latest push for a billionaire tax, but it did little to quiet the broader debate over California’s ability to keep its wealth and investment at home.
