Back in 2020, California lawmakers introduced two bills aimed at raising taxes on the state’s wealthiest residents: Assembly Bill 2088, which would have created an annual wealth tax, and Assembly Bill 1253, which would have raised income tax rates on high earners. Neither bill passed, and a similar follow-up wealth tax proposal, Assembly Bill 259, also failed in the Legislature in 2024.
Rather than disappearing, the idea of taxing extreme wealth has resurfaced in a new form. Instead of going through the Legislature, it is now headed straight to voters as Proposition 40, also known as the 2026 Billionaire Tax Act, which will appear on California’s November 3, 2026 general election ballot.
Key Takeaways
- Proposition 40, the 2026 Billionaire Tax Act, is a one-time 5 percent wealth tax on billionaires headed to California voters on the November 3, 2026 ballot.
- It replaces earlier legislative efforts (AB 2088 in 2020 and AB 259 in 2024) that never passed.
- Two other measures on the same ballot, Propositions 41 and 42, could legally block Proposition 40 even if it passes.
- The Legislative Analyst’s Office estimates it would raise tens of billions of dollars, mostly earmarked for health care.
How Proposition 40 Would Work
Proposition 40 is structured very differently from the 2020 proposals. Rather than an ongoing annual tax on a broad group of high-net-worth residents, it is a one-time tax that applies only to billionaires. Specifically, any Californian who was a resident on January 1, 2026 and has a net worth over $1 billion would owe a one-time state tax equal to 5 percent of that net worth. The tax would be due in 2027, though taxpayers could choose to spread payments out over five years, at a higher total cost for doing so.
Certain assets would be excluded from the calculation, including real estate, pensions, and retirement accounts. This is a narrower scope than AB 2088’s 2020 proposal, which counted 18 categories of assets and applied to a much larger group of Californians with net worth above $30 million.
Where the Money Would Go
Under Proposition 40, the state would be required to spend 90 percent of the revenue on public health care services, such as Medi-Cal, with the remainder going toward education, food assistance, and the costs of administering the tax itself. Normal state constitutional spending limits and school-funding formulas would not apply to this money.
Two Competing Measures on the Same Ballot
Voters will also see Proposition 41 and Proposition 42 on the same November 2026 ballot. Both were placed there as competing measures, and each contains language stating that if it receives more “yes” votes than Proposition 40, courts could determine that it conflicts with and blocks Proposition 40 from taking effect, even if Proposition 40 itself passes with majority support.
Proposition 41 would require the state auditor to review, both before such a measure reaches the ballot and periodically afterward, any program that would receive money from a new special tax created through the initiative process, including recommendations for cost savings. Proposition 42 would prohibit the state from creating new taxes on the ownership of financial assets or other personal property (as opposed to income from those assets), and would limit the ability to apply new taxes retroactively.
Estimated Fiscal Impact
According to the Legislative Analyst’s Office, Proposition 40 would likely generate tens of billions of dollars in one-time revenue, collected over several years. The LAO also notes two sources of uncertainty: how billionaires might adjust their financial behavior in response to the tax, and the fact that much of the wealth being taxed is tied to fluctuating stock values. Separately, the LAO estimates a possible ongoing decline of less than $1 billion per year in state income tax revenue, to the extent that some billionaires reduce their taxable income or leave the state. Administering the tax is expected to cost the state tens of millions of dollars annually, paid for out of the new tax revenue itself.
What Happens Next
Proposition 40 will go before voters on November 3, 2026. Because of the competing-measure provisions in Propositions 41 and 42, the ultimate outcome may not be fully settled by the vote count alone, and could depend on subsequent legal interpretation if more than one of the three measures passes.
This article is for general informational purposes only and does not constitute tax or legal advice. If you have questions about how a wealth tax proposal could affect your specific situation, consult a qualified tax professional.
