Oligarchs Got Crushed on Election Day, But Still Managed to Kill California’s Wealth Tax Dreams

America’s oligarchs fared badly overall on Election Day, but they dodged a bullet in California, and perhaps then some.

California’s Prop. 40, the Billionaire Tax initiative, would have been the nation’s first-ever tax on excessive wealth, a concept Americans have supported in poll after poll. Despite its flaws, the measure would have broken the glass. It would have showed that curbing excessive fortunes is possible in an America whose wealth distribution has grown so skewed that it now resembles that of a kleptocratic developing nation.

But some of the state’s billionaires had other plans. After a healthcare workers union sponsored Prop. 40, they put up more than $330 million to create an advocacy group that would plant doubts and fears in voters’ minds, with an assist from prominent Democrats, most notably Gov. Gavin Newsom.

The billionaire opposition effort not only doomed Prop. 40, but may have convinced voters to pass Prop. 42—one of two competing measures they sponsored—which bars the state from enacting future taxes on many types of wealth. On Monday night, with 83 percent of the votes counted, AP called Prop. 40’s defeat. It has not yet made the call on Prop. 42, which remained ahead by 3.2 percentage points.

Prop. 40 was imperfect. As I wrote in a story prior to the election, it was a one-time tax, with revenues earmarked mainly for one purpose (healthcare), which may have convinced rival unions to oppose it. Critics claimed, among other things, that passing Prop. 40 would compel many of California’s roughly 250 billionaires to flee, decimating the state’s tax base and startup culture.

Silicon Valley congressman Rep. Ro Khanna, a Democrat who supported Prop. 40 to the chagrin of his tech billionaire constituents, dismissed the wealth-flight threat as “total propaganda.” The notion that losing a gaggle of tax-avoiding 0.0001 percenters would significantly harm California’s tax base and culture of innovation also struck him as nonsensical. “If anything,” he told me, “more and more wealth is going to accumulate in Silicon Valley as we see the AI revolution. The reason they don’t want to pay the tax is they don’t want to pay the tax.”

The No on Prop. 40 campaign, in the end, was mainly about greed. But money is power, and the billionaires used theirs to muddy the waters. They provided safe opt-out arguments for unions and for Democrats who have relied on campaign cash from the superwealthy, including former US Rep. Katie Porter, governor-elect Xavier Becerra, and Newsom, who needs the billionaires on his side if he runs for president in 2028. (The California Democratic Party supported Prop. 40.)

Of course billionaires should pay their fair share, the argument basically went, but Prop. 40 was the wrong way to accomplish it. Newsom et al. repeated the claims that it would harm the economy, and that you can’t tax wealth at the state level, because that’s like playing Whac-a Mole as the mega-rich scurry from jurisdiction to jurisdiction to avoid taxation. You’ve got to tax wealth at the federal level, Newsom and others have said, likely knowing full well a federal wealth tax is never gonna fly—certainly not with this Supreme Court.

At the same time, Newsom (though not Becerra) endorsed Prop. 42, which, as the state legislative analyst explained, “could reduce future tax revenues. When and by how much future revenues would be reduced is unclear.” (This, ironically, was one of the key arguments against Prop. 40.)

Prop. 42 could reduce state revenues in two ways: First, by prohibiting retroactive taxes—a potential poison pill for Prop. 40, which was retroactive to January 1, 2026. If Prop. 42 passes, as seems likely, it will amend the state constitution to eliminate California’s ability to levy future wealth taxes, as the ballot guide explains, “on the ownership of personal property (all things people own other than real estate).” The current constitution, the Yes on 42 ballot argument warned, allows the Legislature to tax personal property, business interests, and financial assets, including assets in retirement and investment accounts “even though you already paid taxes on that money when you earned it!” 

That was a dirty trick. Beyond run-of-the-mill property taxes on homes and businesses, state lawmakers have never so much as proposed any wealth tax on ordinary Californians. The “pro” argument points vaguely to a handful of past legislative attempts to tax people’s nest eggs, conveniently neglecting to mention that those bills (which all failed) only targeted assets in excess of $30 million, and typically much more.

That is, the “you” in their scenario was actually “them”—families with excessive wealth.

The double-taxation claim, too, was smoke and mirrors. Yes, your $5,000 stock investment or Roth IRA contribution probably did come from your post-tax earnings, but when that investment eventually grows into $25,000, your $20,000 profit isn’t being taxed. And again, the only wealth taxes state or federal lawmakers have ever introduced apply only to the households that wealth managers and estate lawyers categorize as “ultra-high net worth.”

The threat of state tax authorities coming for people’s retirement savings proved powerful, though. Powerful enough to sway many Californians who may not have fully realized they were actually voting to protect the largely untaxed megafortunes of some of the richest human beings on the planet—who now, encouraged by their victory, will keep using their vast hoards to bend government policy to their will, public be damned.