California's billionaire tax is losing 56% to 44%, and a rival measure may kill it anyway

California voters appeared to be rejecting Proposition 40, the first-of-its-kind one-time 5% tax on the net worth of the state's roughly 200 billionaires. CalMatters reported early Wednesday that the measure trailed by 56% with 54% of votes counted, according to the Associated Press. The New York Post had it behind 56% to 44% with roughly half the ballots in. California is still counting, so the final margin will move, but neither outlet describes the measure as close.

The rival measure matters more than the margin

Prop. 40 has a second problem beyond the vote. Opponents put two countermeasures on the same ballot. Under the state constitution, when competing measures conflict, the one with the most "yes" votes wins and nullifies the others, CalMatters explained.

• Prop. 42 would bar the state from taxing financial assets, private businesses and pensions, and would ban retroactive taxes. It led with 55% approval on Tuesday night, per CalMatters, and the Post said it had drawn more "yes" votes than the billionaire tax.
• Prop. 41 would restrict taxes that get around the state's 1979 spending limit and require audits of future tax proposals. It was trailing, with 52% voting no.

So even if Prop. 40 closed the gap, a Prop. 42 win with more votes would void it and shut the door on future wealth taxes.

Who paid for what

CalMatters counts $316.7 million spent by billionaires and business interests against Prop. 40, including backing for Props. 41 and 42. The Post puts the fight at more than $330 million. The two outlets are counting somewhat differently, so we use both figures as reported. Google co-founder Sergey Brin gave $102 million to the committee Building a Better California, according to CalMatters. Gov. Gavin Newsom opposed the tax and endorsed Prop. 42, while the state Democratic Party and the California Federation of Labor Unions backed Prop. 40.

The union behind it, SEIU-UHW, appeared to concede before polls closed. Its president, Dave Regan, said the union would try again in 2028 if the Legislature "fails to deliver a real solution" to fund health care cut by federal law.

The number nobody agreed on

The union said the tax would raise $100 billion over five years. The nonpartisan Legislative Analyst's Office said it would raise "tens of billions of dollars," and that billionaires leaving could cut state income tax revenue by less than $1 billion a year, per CalMatters. That is lower than the $1 billion to $3.5 billion a year in the Stanford working paper we covered on October 22. The gap between those estimates, not the campaign ads, is what a state budget writer now has to plan around.

What it means for business owners

For a founder holding a large stake in a private company, the immediate threat of a valuation-based tax recedes, and a Prop. 42 win would put that in the constitution. For clinics, hospitals and contractors paid through Medi-Cal, the revenue the union wanted does not arrive, and the state's budget gap from federal cuts stays open. Watch the Legislature's next budget cycle, which is where the union says it will push next. Earlier on this story: Zuckerberg and Meta's California plans.

Sources: CalMatters (citing the Associated Press count); New York Post. Vote totals are partial and unofficial as of Wednesday evening. The California Secretary of State certifies final results.