This November, California voters will weigh in on a proposal that supporters say would help shore up the state’s strained Medi-Cal budget by taxing the wealth of billionaires. But according to Ahmad Thomas, CEO of the Silicon Valley Leadership Group, the plan trades away California’s long-term economic health for a quick cash infusion — and voters should reject it.
Proposition 40 would impose a one-time 5% tax on Californians whose covered assets exceed $1 billion, with the revenue directed toward healthcare and other public programs. Two related measures, Propositions 41 and 42, are also on the ballot and would reshape how such taxes could be structured and reviewed in the future.
Thomas argues that California’s identity has long been built on wagering on what comes next — from the rise of semiconductors and personal computers to breakthroughs in biotechnology, clean energy, quantum computing and artificial intelligence. That culture of innovation, he writes, doesn’t just produce successful companies; it fuels job growth, broadens economic opportunity and generates the tax revenue that supports schools, healthcare and the state’s broader safety net.
That’s precisely why he believes Prop. 40 poses a serious risk. While the need for more healthcare funding is real — especially with Medi-Cal facing new budget gaps and living costs climbing across the state — Thomas contends this particular measure is the wrong tool for the job.
He points to projections from the nonpartisan Legislative Analyst’s Office, which estimates Prop. 40 could generate tens of billions of dollars in revenue in its early years. But that windfall, he warns, would likely be short-lived. The same analysis suggests California could see hundreds of millions of dollars or more in lost income-tax revenue annually going forward, if high-net-worth residents choose to relocate rather than absorb the tax.
That tension, Thomas argues, is the central flaw in the measure: it swaps steady, long-term revenue for a one-time boost. Once that initial money is spent, the state could be left with a permanently smaller tax base to fund essential services in the years that follow.
Beyond dollars and cents, Thomas raises concerns about where entrepreneurs and business leaders choose to build their companies. Founders and executives make decisions about where to grow, hire and invest — and California benefits when those leaders stay rooted here. The state’s continued dominance in tech and innovation, he notes, isn’t guaranteed; other states and countries are actively courting entrepreneurs with their own incentives.
A particular sticking point, according to Thomas, is that Prop. 40 would effectively tax the estimated value of businesses and ideas before they generate any actual profit or are sold. That structure, he says, doesn’t reflect how many innovative companies actually operate. A biotech firm might spend a decade developing a single drug with no guarantee of success. A clean-energy startup could require years of investment before turning any profit. Under Prop. 40, founders in these situations could face enormous tax bills tied to paper value they haven’t yet converted into cash.
Thomas is careful to note that he’s not arguing against taxing the wealthy altogether. He acknowledges that California already taxes wages, business income, dividends and capital gains, and that those who have benefited most from the state’s success should help sustain the institutions that made that success possible.
That’s why he’s urging voters to instead support Propositions 41 and 42. Prop. 42, he explains, would bar the state from creating new taxes based purely on ownership of financial assets, business interests or intellectual property, and would prevent certain taxes from applying retroactively. Importantly, it wouldn’t stop California from taxing income or realized gains — it would simply draw a clearer line between taxing what someone actually earns versus what they merely own on paper, giving business leaders more predictability as they plan where to grow and hire.
Prop. 41, meanwhile, would require greater transparency and auditing around special tax measures, helping voters better understand how new taxes would function and whether the programs they fund are actually delivering results.
Thomas’s ultimate argument is that California doesn’t have to choose between remaining a global innovation leader and maintaining strong public services — the two, he says, are deeply connected. In his view, Prop. 40 offers a short-term fix that risks driving away the companies, jobs and tax revenue California depends on for the future. Props. 41 and 42, by contrast, offer what he calls a steadier path built on accountability and predictability.
Original source: CalMatters
