California Billionaires May Well Prevail in Their Quest to Block a State Wealth Tax

Greed is on California’s state ballot, and it appears to be winning.

For a while, Prop. 40, the Billionaire Tax initiative, which is supported by the state Democratic Party but opposed by many unions and prominent Democrats, was polling well. The notion of taxing the excessive wealth of the super-rich, or the basis of that wealth—the “paper profits” on a sea of unsold investments—has become increasingly popular across the nation. Nobody much likes taxation, but the way the economic spoils are distributed just isn’t working out well for most Americans, whose costs of living are growing faster than their wages, even as the wealth of the 0.00001 percent goes completely haywire.

Add to that the specter of a wealthy, hyper-transactional president openly using his office to enrich himself, and his family and friends, often at taxpayer expense. The public, too, is finally starting to grasp the full extent to which our billionaires, most notably Elon Musk, are using their largely untaxed and godlike fortunes for political gain: dictating our ballot choices, messing with elections, harming the nation, and dodging accountability.

If Prop. 40 passes, it would be the first-ever tax on excessive wealth, as opposed to income, in the United States. It would place a one-time, 5 percent levy on the net assets of California residents in excess of $1 billion. The measure, put forth by a health workers union to plug holes in the state Medicaid and education budgets created by Trump’s One Big Beautiful Bill, immediately raised the hackles of California’s three-comma club, whose members tend to be allergic to taxation.

The claim that losing 250 billionaires would kill the state tax base and stifle innovation is laughable. They pay minimal taxes, and there are tens of thousands of Californians worth $30 million and up.

These moguls, led by Google co-founder Sergey Brin (who now claims residence in Nevada), started a group called Building a Better California, which they’ve bankrolled to the tune of $333 million—about 0.1 percent of the combined net worth of its top 5 backers: Brin, Google’s Steve Schmidt, venture capitalist John Doerr, Stripe co-founder Patrick Collison, and investor Vinod Khosla. The group has blanketed the state political landscape with anti-Prop 40 advertising and propaganda. It also bankrolled two poison pill initiatives, Props. 41 and 42, that we’ll talk about in a minute.

There are legitimate critiques of Prop. 40: Voter initiatives are a lousy way to do tax policy. Maybe it won’t bring in as much cash as projected. It’ll be challenged in court. (What isn’t?) Voters might conflate it with another measure, Prop. 3, that would extend an existing tax on income in excess of $371,000 ($742,000 for joint filers) to fund public education.

One big (valid) gripe about Prop. 40 is that it’s one-and-done. The California Teachers Union, for instance, says it opposes the measure on the grounds that it “will not provide the sustainable and long-lasting funding that our schools and communities deserve.” Such arguments are politically safe for Democratic politicians such as Xavier Becerra—who will almost certainly replace Gavin Newsom as governor, and who opposes Prop. 40 (though, in true weasel fashion, he has declined to take a position on the competing propositions, 41 and 42). The fact that most of the Prop. 40 revenues are earmarked for health care also may have miffed some of the other unions that oppose it, and that would prefer some of the money go toward their own interests.

But the billionaires have been hawking other, dubious concerns, which Democratic foes of Prop. 40, including Newsom, have parroted without a lot of scrutiny. For instance, the claim that Prop. 40 will end up costing California money because billionaires will flee the state, and that this would be terrible for its economy.

US Rep. Katie Porter, who lost her recent run for governor, posted a video of her top three reasons to vote against Prop. 40. To paraphrase: It doesn’t accomplish any of the big things Democrats have always longed for, such as Medicare for All; It’s “big bucks for Big Insurance;” and “It’s a one-time tax that would create long-term harms” by driving “hundreds of billions in potential tax revenues out of California.”

Her first reason is clearly ridiculous. The second is misleading: State legislators would sort out the details but, per the legislative analyst, 90 percent of the tax revenue would have to be spent on “health care services for the public.” To the extent this would “line the pockets of health-care executives,” as Porter put it, well, that’s a function of America’s dysfunctional health care system, which Prop. 40 wasn’t designed to fix. But the alternative, proponents say, is to leave millions of low-income Californians, including many children, without health insurance, and put tens of thousands of health care providers out of work.

Her third talking point is echoed by other opponents, including Newsom, who has close ties to the Getty clan and is likely running for president, which means he needs billionaires in his corner. This one is straight from the No on 40 playbook: the notion that if the measure passes, these captains of industry will pull up stakes and depart for other jurisdictions, crippling the tax base and stifling California’s engine of innovation. Early on, a handful of billionaires announced their intention to leave. “The departure of these individuals alone,” the No on 40 campaign asserted, “is estimated to remove $536 billion, or nearly 30 percent of aggregate billionaire wealth, from the tax base.” This claim, though, is based on an analysis by the conservative Hoover Institution that prompted a detailed rebuttal from the economists who helped write Prop. 40, arguing that the Hoover study is deeply flawed.

There are other, more basic problems with the notion that significant wealth flight will occur and that it will harm California and stifle innovation. As I’ve written elsewhere, the choice of whether to stay or go also depends on many factors unrelated to taxation, and nobody can accurately predict how most billionaires would react if Prop. 40 passed. People who claim they can either have an agenda or are “delusional,” the former chief economist for California’s tax authority told me.

Nvidia’s Jensen Huang, an outlier, has made clear he’ll stay put, and says he has no problem paying whatever taxes the state may impose. It’s a “privilege,” he told CBS News.

“I’m not afraid of paying taxes. I’m just afraid of being poor,” Nvidia CEO Jensen Huang told @jolingkent, as he explained why it would be a “privilege” to pay some $8 billion in taxes under California’s Proposition 40 – a one-time, 5% state tax on the net worth of California's… pic.twitter.com/SR3amOK1Om

— CBS Sunday Morning (@CBSSunday) October 19, 2026

Of course, most of these tech billionaires weren’t wealthy when they started out—Huang once worked as a dishwasher at Denny’s. New scrappy founders will come around and start ventures with or without the help of their predecessors. And even if all of California’s billionaires (Forbes counts 255) were to leave and quit investing in new Silicon Valley companies, there’d still be tons of money available. The data firm Altrata, which tracks global wealth trends, estimates there are well over 22,000 ultra-high net worth individuals—people with net assets of $30 million and up—in San Francisco and Los Angeles alone. And investment, of course, can come from anywhere.

Rep. Ro Khanna doesn’t buy the claim that billionaires would flee over a 5 percent wealth tax: “They know that that is total propaganda.”

Finally, billionaire wealth is not a significant part of California’s tax base. In op-eds opposing Prop. 40, writers have pointed to the tax contributions of the state’s richest 1 percent—Newsom has even cited the top 10 percent. But billionaires comprise another realm entirely, and they already, by and large, have gone out of their way to ensure that only the tiniest sliver of their true economic income, and that of their companies, is subject to tax. Take Peter Thiel, one of the handful who say they’re already done with California. He famously used outrageous tactics to accumulate more than $5 billion in a Roth IRA, a tax-free retirement account designed for middle-class earners.

Newsom and others claim that, because billionaire wealth is portable, any wealth tax should be imposed at the federal level, not the state level, but as I made abundantly clear in my earlier piece, “How to Tax a Billionaire,” a federal wealth tax is never going to fly. Not, at least, without radical changes in the Supreme Court.

Besides, billionaires have done tremendously well in California, whose tech industry was built on a foundation of publicly funded innovation. According to Forbes, Mark Zuckerberg’s net assets grew from $64.4 billion in 2023 to $214.6 billion on Thursday—an untaxed 233 percent gain in less than three years. If you’d put $1 in the S&P 500 in September 2023, and reinvested the dividends, it would have been worth about 80 bucks in September 2026.

Would billionaires really turn tail over a paltry 5 percent tax?

At a recent event in San Francisco, I posed that question to Silicon Valley congressman Ro Khanna, whose support for Prop. 40 has made him persona non grata, he told me, among the tech billionaires in his district. “They know that that is total propaganda,” Khanna replied. “The AI revolution is happening in the Bay Area—it’s not happening in Miami or Austin. More wealth continues to pile into Silicon Valley than people know what to do with. One-third of the nation’s wealth is in my district and the 50-mile area around it. So the idea that investment is going to leave is just counter to every point of data that we have.”

Prop. 40 may be less than ideal, but it would at least break the glass and create a precedent for taxing runaway wealth.

“The reason they don’t want to pay the tax is they don’t want to pay the tax,” he continued. “They simply believe they’re entitled to this wealth…that they have, through their own labor, earned every penny, because they somehow are better than the rest of us.”

So, sure, there are legitimate quibbles, and maybe Prop. 40 isn’t the greatest thing, but it does at least break the glass. It creates a precedent for taxing wealth, which is what the billionaires fear most. In the end, their argument mainly boils down to greed. They don’t need this money. The reality, as I learned while researching my 2021 book, Jackpot, is that the nation’s richest men—and they are mostly men—are engaged in an epic yacht-measuring contest, literal and figurative.

And they don’t know how to stop.

At the same event where I interviewed Khanna, I witnessed a barnburner of a speech from Erica Payne, executive director of Patriotic Millionaires, an advocacy group of wealthy Americans pushing for saner, more inclusive tax policies. It’s worth watching if you’ve got the time.

The billionaires’ quest to hoard wealth and fight taxes tooth and nail is, in Payne’s view, an addiction. “What happens when people start doing drugs?” she told the crowd. “The drug becomes disproportionately important. They need more of the drug to get the same high. Their emotional baseline changes and their braking system is less effective. So, the next time a billionaire says they don’t want to be taxed, you just say to yourself, that’s the addiction talking.”   

This addiction to hoarding is what prompted the inclusion of the competing propositions I mentioned. Both are poison pills. Prop. 41, in addition to imposing audits on future tax initiatives, would nullify any state tax whose revenues are excluded (as Prop. 40 would be) from the spending limit voters passed in 1979. Because the two propositions are in conflict, the legislative analyst notes, Prop. 40 would likely be voided if both measures pass and Prop. 41 gets more yes votes.

The same goes for Prop. 42, which Newsom also supports. This measure also subverts Prop. 40 by prohibiting retroactive taxes. (Prop. 40 would apply to anyone who was a California resident on January 1, 2026.) But Prop. 42 also prohibits any future state tax on “personal property, business interests, and financial assets”—namely, wealth—“including assets in retirement and investment accounts.”

The billionaires are quite sneaky here. By calling out retirement savings, they are implying that ordinary people’s nest eggs are at risk. That’s really not true, but Newsom, shamefully, has embraced the fearmongering: “We all agree that Californians deserve to have their retirement and life savings protected from new state taxes,” he said in a statement released by Prop. 42’s backers.

One never knows what’ll happen on Election Day, and polls are often unreliable, but the latest reputable ones, with days to go, are suggesting that Prop. 40 and Prop. 41 are likely to go down, whereas Prop. 42 may well squeak by.

So much for California dreamin’.