The California billionaire tax, Proposition 40, is finally coming to a vote on Nov. 3. The measure would levy a one-time 5% tax on the net worth of the state's billionaires. Two competing initiatives on the same ballot, Props 41 and 42, are backed by opponents of the tax, including billionaires. 

If either garners more yes votes than Prop 40, it could keep the tax from taking effect. 

The labor union Service Employees International Union-United Healthcare Workers West (SEIU-UHW) is spearheading the campaign for the tax on the state's ultra-wealthy to prevent hospital and clinic closures, protect healthcare jobs, and help fund K-14 public education and state food assistance programs.

Opponents, including Gov. Gavin Newsom, say the tax would fuel an exodus of wealthy company founders and investors, spark job losses, and further weaken California's economy.

Read more: How billionaires get away with paying less tax

Prop 40 would levy a one-time 5% tax on the net worth of billionaire state residents, subject to the asset restrictions noted below. Taxpayers could choose to pay the tax in five annual installments, with a 7.5% annual deferral charge on the unpaid balance.

Billionaire residents in California as of Jan. 1, 2026, would owe the tax in 2027. That's an estimated 255 eligible taxpayers, according to data from Altrata, a wealth-intelligence firm, reported by the Wall Street Journal.

The tax proposal is not based on income — that's a loophole that allows billionaires to pay less in income taxes than the average American. Rather, the proposed California tax is based on billionaires' assets, including equity holdings, often in their own companies. The impact on the most wealthy would vary widely.

A half-dozen or more high-profile billionaires relocated out of state as news of the proposed tax rolled out last year, so the number may be slightly lower.  

Those who have reportedly relocated include Google co-founders Larry Page and Sergey Brin, though neither has said that their moves were related to the possible tax.

A Meta regulatory filing dated Oct. 21 said that founder and CEO Mark Zuckerberg told a special board committee that he was considering moving out of the state to avoid the tax if it were passed. 

The committee said it was "critically important to keep Mr. Zuckerberg in a leadership position with our Company and that he continue to reside in and manage the Company from our headquarters in California," and approved a special class of stock that he could use to pay any wealth tax due. 

The tax's effect would vary widely. The Tax Foundation, a right-leaning tax policy nonprofit, projected that the tax would render Tony Xu, the founder of DoorDash, bankrupt, with a tax liability of $4.17 billion, unless he could challenge the initiative's valuation of his assets.

On the other hand, Jensen Huang of Nvidia would face a tax liability of more than twice that: $8.5 billion. He told Bloomberg that he's fine with that.

Read more: Where do millionaires keep their money?

The California healthcare worker union, SEIU-UHW, launched the "emergency tax" initiative to offset possible healthcare staffing issues and service reductions at healthcare facilities. The union estimates a nearly $100 billion loss of federal funding over the next five years due to the passage of the One Big Beautiful Bill Act.

Taxpayers and trusts with assets over $1 billion would be taxed on businesses, securities, collectibles, and intellectual property, but the tax would exclude real property and certain retirement accounts and pensions.

The California Billionaire Tax Act is estimated to raise about $100 billion, according to the initiative's website. The Legislative Analyst's Office, the state's nonpartisan fiscal adviser, estimates that the state would collect tens of billions of dollars from the wealth tax but says the exact amount is harder to predict.

BillionaireTaxNow.org says the money would be used to:

Keep hospitals, ERs, clinics, nursing homes, and home care facilities open and staffed

"Stabilize" healthcare insurance premiums and coverage

Maintain healthcare jobs

Fund K-14 public education programs and staffing

Fund California food assistance programs

The Institute on Taxation and Economic Policy, a left-leaning think tank, supports the California billionaire tax, saying that the One Big Beautiful Bill Act "cut health care and food support in part to pay for tax cuts for the very wealthiest Americans. The legislation gives more than $1 trillion in tax savings to the richest 1% of households over the next decade."

ITEP added in the analysis that, "ultra-wealthy households have many ways to enjoy a lavish lifestyle without selling most of their holdings, and so can largely avoid the individual income tax. The billionaire tax directly remedies this injustice by taxing all wealth, whether this wealth has been realized as income or not."

The Tax Foundation believes the California billionaire tax, as drafted, contains "aggressive design choices and possible drafting errors" that could result in the proposed one-time 5% tax being "dramatically higher."  

It warns that "the poorly drafted initiative" could force company founders to sell "a significant portion" of their shares and lose their controlling interests. Stock prices could plunge, impacting retirement savings and investment account balances of working Americans. 

The Hoover Institution, a right-leaning think tank, has said the wealth tax would leave California about $25 billion worse off, accounting for lost income tax revenue from billionaires leaving the state. It also estimated revenues from the levy would fall short of the $100 billion projection, more likely generating just $40 billion.

Read more: What is a high-net-worth individual?

Sen. Bernie Sanders (I-Vt.) has long advocated for a national wealth tax. His "Make Billionaires Pay Their Fair Share Act," co-sponsored by Rep. Ro Khanna (D-Calif.), was introduced in March.

The national tax would levy a 5% annual, not one-time, tax on the estimated 938 billionaires in the U.S., estimated to raise $4.4 trillion over the next 10 years. In the first year, the bill would give a $3,000 payment to "every man, woman, and child" in a household earning $150,000 or less. 

The bill moved to committees in both the Senate and House, where no further action was taken.

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