California voters were projected to reject Proposition 40, a ballot measure that would have imposed a one-time 5 percent tax on the net worth of residents worth more than $1 billion, in the November 3 general election.1,3
The outcome was described as a win for technology and business executives who spent hundreds of millions of dollars against the measure. The margin was not yet final as counting continued and differed slightly between tallies: an analysis from Decision Desk HQ cited by The Hill put the vote at 54 percent against and 46 percent in favor, while CNBC reported 56 percent voting no and 44 percent voting yes. A graphic in The Dispatch showed 55 percent voting no to 45 percent yes. The measure required a majority to pass, and election experts said defeat was likely.1,3,4
Proposition 40 would have applied to anyone who was a California resident on January 1, 2026, and was worth at least $1 billion when the state measured wealth on December 31, 2026. It would have affected about 200 people. Those subject to the tax could have paid in full in April 2027 or spread payments over five years with interest.3,4
Two additional ballot measures that could block the billionaire tax were drawing majority support. Proposition 41 and Proposition 42, which would limit use of the revenue and prevent state taxation of personal assets, were both showing majority yes votes. If either received more votes than the billionaire tax, the billionaire tax would be defeated.3
Service Employees International Union-United Healthcare Workers West, the health care union that sponsored the proposal, all but conceded defeat Tuesday night. The union said it would try again in 2028 unless the Legislature acted to "make billionaires pay their fair share."3
The proposal was a tax on ownership rather than on income or sales, similar in that respect to a property tax. For most of the roughly 200 people in its scope, wealth is held largely in shares of companies they founded. Mark Zuckerberg's net worth was reported at around $240 billion, with more than 90 percent held in Meta stock, implying a tax bill of about $12 billion that would have required selling shares.4
A sale of that scale also raised questions about corporate control. Meta has Class A shares with one vote per share and Class B shares with 10 votes per share, most of which Zuckerberg owns. He owns about 13 percent of the company while controlling about 61 percent of the votes through super-voting shares. According to a filing about a new share class, Zuckerberg told the chair of a board committee on July 8 that paying the tax could force him to sell enough Class B stock to reduce his voting stake to about 53 percent, still a majority but closer to losing it after any further tax increase or large fundraising.4
The board had been weighing how to pay for artificial intelligence investments since February, when it created a special committee after management presented forecasts in which Meta needed to raise hundreds of billions of dollars starting within months. Selling new voting stock would dilute Zuckerberg's majority, which he said he would not support. On October 21, Meta announced a 2-for-1 stock split, and the filing indicated the split resulted from months of negotiation between Zuckerberg and the board over funding the AI buildout and the ballot measure, a settlement that could affect who controls Meta for years.4
Zuckerberg's lawyers said within weeks of the July discussion that he was considering leaving California. A move would not have changed liability under Proposition 40 for anyone who lived in California on January 1, 2026, but it would have spared him California's 13.3 percent income tax on shares sold to pay the tax and offered protection if the one-time levy was followed by another.4
Elsewhere, proposals to raise income taxes on high earners fared better. In Washington state, voters supported a new tax that would impose a 9.9 percent rate on household income of more than $1 million a year. In Colorado, a plan to replace a 4.4 percent flat tax with a graduated income tax with a top rate of 8.4 percent on income over $1 million is too close to call. With Democrats set to control both the House and the Senate, tax experts expect new federal proposals to raise taxes on high earners while cutting taxes for lower- and middle-income taxpayers. "It is clear Democrats will try to lower taxes for middle-income households and raise taxes on certain businesses and high-income households," said Howard Gleckman, nonresident fellow at the Tax Policy Center. "But it is much too soon to know how."3
Possible models include plans floated last year by Senators Chris Van Hollen of Maryland and Cory Booker of New Jersey. Van Hollen's plan would add a graduated surtax on earnings above $1 million, starting at 5 percent for income between $1 million and $2 million and rising to 12 percent above $5 million, for a new top rate of 49 percent under the existing 37 percent top marginal rate, offset by a new exemption of $46,000 for single filers and $92,000 for joint filers. Van Hollen also proposed raising the top capital-gains rate from 23.8 percent to 35.8 percent. Booker's plan would raise the top rate to 43 percent and more than double the standard deduction to $37,500 for single filers and $75,000 for joint filers. Pairing higher rates with cuts for others could be difficult given deficits, tax experts said. "A key question is the debate about how much to prioritize further cuts at all, given the revenue needs for the deficit situation and the Democrats' spending priorities," said Garrett Watson, vice president of federal tax policy at the Tax Foundation, who said those priorities include reversing Trump-era tax cuts and expanding spending.3
Attention may also turn to a federal wealth tax or a tax on unrealized gains. Representative Ro Khanna of California, who campaigned for the California tax and whose Silicon Valley district includes substantial technology wealth, joined with Senator Bernie Sanders of Vermont on the "Make Billionaires Pay Their Fair Share Act," which would impose a 5 percent tax on total net worth above $1 billion each year, unlike California's proposed one-time levy. President Trump would likely veto any Democratic tax plan, particularly one aimed at tax cuts passed in 2017 and extended and expanded last year. Still, proposals introduced in the next two years could shape the 2028 debate, while the final California count could take weeks and supporters weigh a 2028 return. "Proposals made in 2027 will shape the direction of policy in the future," the Tax Foundation said in a report. "While their ambitions to raise taxes will be limited by President Trump's veto, these proposals will serve as messaging and discussion vehicles over the next two years on the direction of the tax code."3,4
