Proposition 40 Asks 19 Million California Filers One Question

More than 19 million Californians file a state income-tax return. If Proposition 40 passes on November 3, every one of those returns would have to carry a declaration that only about 200 people can answer yes to: a statement of whether the filer’s net worth exceeds $1 billion.

Proposition 40 is the one-time 5% tax on the net worth of California billionaires, with 90% of the revenue earmarked for health care and the rest for food assistance, education and running the tax. The state’s Legislative Analyst’s Office expects it to raise tens of billions of dollars spread over several years, with a possible ongoing loss of less than $1 billion a year in income-tax revenue if some billionaires leave or change their financial behaviour. Supporters put the figure at about $100 billion over five years. The Hoover Institution, analysing the measure’s text, calculates gross collections closer to $40 billion over the same period.

The measure was put on the ballot by SEIU United Healthcare Workers West, which argues the money is needed to backfill Medi-Cal, the health insurance program covering roughly one in three Californians, against federal funding reductions. Governor Gavin Newsom opposes it. Senator Bernie Sanders has campaigned for it. The campaign around it has mostly been fought on whether billionaires will pay or leave, and on two rival measures designed to stop it. The declaration on every return has barely featured in that fight, even though it is the provision that touches the most people.

For the other 19 million filers, the declaration is a line to answer no to, and the state still has to build the machinery behind it. Almost everyone answers no. The Legislative Analyst’s Office puts the cost of working out what is owed and collecting it at tens of millions of dollars a year for several years, paid from the new tax itself, for a tax whose payers number about 200.

Residency was fixed on January 1, 2026, shortly after the measure was filed and more than five months before it qualified for the ballot. Net worth is measured on December 31, 2026, so the bill depends on what markets do between now and the end of the year. Payment is due April 15, 2027, or spread over five annual instalments at a 7.5% yearly charge on the unpaid balance. The rate itself phases in: nothing at $1 billion, rising to the full 5% at $1.1 billion, which makes $55 million the smallest lump-sum bill at the top of the phase-in.

Married couples count as one taxpayer, and the count includes the spouse’s worldwide assets whether or not the spouse lives in California. The floor is 25%. The measure starts from 100% California apportionment of a taxpayer’s wealth, and a taxpayer who wants a lower share must prove it with clear and convincing evidence, ordinarily no lower than 25%. Wealth does not have to have been earned in California, or still be held there, to be taxed. The measure’s own text concedes its apportionment formula may be held invalid.

The word “one-time” may not survive the vote either. Section 50310 of the act lets the Legislature amend any of its provisions by a two-thirds vote, including the $1 billion threshold, the 5% rate, and the one-time character itself. California has been here before: the “temporary” income-tax surcharge voters approved as Proposition 30 in 2012 was extended by Proposition 55 in 2016 and remains in effect, and Proposition 3 on this same ballot would make its higher rates permanent.

The money, if it arrives, cannot be spent at once. The caps bind first. Annual spending from the earmarked fund is capped at $22.5 billion for health care and $2.5 billion for the rest, so a large haul would sit in a reserve fund for years. Hoover’s analysis adds a calendar problem: roughly two-thirds of the estimated federal Medi-Cal reductions fall after 2030, while the one-time collections are projected to be exhausted by about 2029. The revenue and the gap it is meant to fill peak in different years.

Six billionaires had already left California publicly between the measure’s filing and the January 1 residency date, according to Hoover’s count, including Google co-founders Sergey Brin and Larry Page, removing roughly $536 billion from the tax base. Liability was already fixed. Leaving now does not help anyone caught by the January date, since residency for this tax was settled at the start of the year. What the departures change is the size of the base the tax is measured against, not who is liable.

Challenges to the measure would run on a short clock written into the text. Facial challenges must be filed within 60 days of the election, with appeal straight to the California Supreme Court, and the measure’s built-in lawsuit targets a ruling by November 1, 2027. The drafters anticipated the fight in the same document that creates the tax, down to a severability clause instructing courts to preserve whatever provisions survive.

Propositions 41 and 42 sit on the same ballot and could still nullify Proposition 40 even if it wins a majority, if either of them wins more yes votes and a court finds the measures conflict. Suzanne Jimenez, chief of staff of SEIU-UHW, said: “California voters won’t be fooled by the antics of a few cynical billionaires.” Abby Lunardini, spokeswoman for Building a Better California, which backs the rival measures, said: “We really believe in public investments to make life more affordable and better. We also believe that Californians deserve more accountability for their tax dollars.”

If the Attorney General declines to defend the act, the text hands the defence to anyone willing to take it: any California citizen may litigate on the act’s behalf and charge the fees to the Attorney General’s office. The defence would continue anyway. The severability clause would keep the surviving provisions standing while the rest is fought over.