California voters will decide in November whether to impose a one-time 5% tax on billionaire wealth, a historic attempt to tap the resources of the ultra-rich that has sparked fierce opposition and flight from the state. According to the Forbes billionaires' list, 260 billionaires lived in California as of early October, holding nearly $2.5 trillion in wealth. If Proposition 40 passes, the tax could raise approximately $110 billion, with much of the money intended to replace Medicaid funding removed by federal legislation. Six Nobel prize-winning economists endorsed the measure, calling it potentially "a turning point in the battle between democracy and oligarchy" and predicting it would inspire similar taxes elsewhere.
The debate reflects a broader challenge facing American democracy. One percent of Americans hold over 31% of the nation's total wealth, amounting to $55 trillion in net worth. Research found that the country's richest 384 oligarchs paid only 24% of their economic income in 2025, compared with 30% for the average taxpayer. ProPublica reporting revealed that some of the richest Americans live largely tax free. Proposition 40 targets wealth rather than income, attempting to overcome billionaires' ability to minimize reported earnings while hoarding assets.
However, opposition is mounting. Governor Gavin Newsom and Xavier Becerra, both Democrats, oppose the measure, fearing it will prompt billionaires to relocate to lower-tax states. Google co-founder Sergey Brin has helped coordinate approximately $200 million to oppose Proposition 40 and promote two alternative propositions. In advance of a January 1st, 2026 deadline, several wealthy individuals have already moved business interests and residences out of state: Brin and co-founder Larry Page moved Google interests out of California around Christmas 2025, Uber's former CEO Travis Kalanick moved to Texas, and Peter Thiel relocated to Miami. A September poll found Proposition 40 falling just short of majority approval.
Even if the measure passes, its effectiveness remains uncertain. Economists from Stanford University concluded it would raise only around $30 billion, while lost income tax revenue would cost the state nearly $39 billion in net present value. The tax faces legal challenges on constitutional grounds, including claims that retroactive taxation violates due process. Real estate will not be taxed, and foreign billionaires may avoid liability under double taxation treaties. Analysts expect more billionaires to leave, potentially reducing future income tax revenue as they assume the temporary tax will become permanent. Between January and October 2026, the number of California billionaires grew by 20, suggesting some remain despite the proposal.
For savers and borrowers in California, the tax outcome will determine whether the state can maintain current Medicaid funding levels or whether services must be reduced.