California voters have turned back an effort to make the state the first in the nation to tax billionaires based on their net worth, dealing a blow to labor organizers while handing a decisive win to the tech and finance executives who spent heavily to defeat it.
The Associated Press confirmed Monday that Proposition 40 failed by a margin of roughly 52.8% to 47.2%. The measure had been trailing for days before final results were called.
Leaders of Service Employees International Union-United Healthcare Workers West, the labor group behind the initiative, acknowledged the loss shortly before polls closed but said they are not giving up on the idea. Union president Dave Regan said the organization plans to bring a similar measure back in 2028 if state lawmakers don’t come up with another way to shore up healthcare funding that has been strained by recent federal policy changes.
“That’s not a hypothetical. That’s our plan,” Regan said.
Tuesday’s results amounted to a broader setback for the union, which has built a reputation for pushing aggressive ballot measures. Voters also rejected Proposition 44, a union-backed measure that would have placed new restrictions on how clinics spend their money. Meanwhile, Proposition 42 — a competing measure that would bar any future wealth tax in California — appeared to be passing by a 51.6% to 48.4% margin as of Monday evening. If it holds, that outcome could complicate the union’s stated plans to try again down the road.
Supporters of Prop. 40 had argued the measure would have generated roughly $100 billion for healthcare and education by imposing a one-time 5% tax on billionaires’ wealth. Opponents, however, framed its defeat as a win for the state’s economic stability.
“Proposition 40 was a reckless experiment conducted on our state’s economy with little regard for the harms it would cause,” said Evan Westrop, a strategist for the No on 40 campaign.
The opposition effort, bankrolled by wealthy tech investors and healthcare interests, contended the proposal had already pushed billionaires to leave California and would do lasting damage to the state’s income tax base. Even in victory, opponents acknowledged Monday that California still faces significant strain in funding healthcare programs affected by federal cuts.
A split among Democrats
From its earliest days, Prop. 40 exposed deep fractures within the Democratic Party and spurred some of Silicon Valley’s wealthiest figures to spend enormous sums fighting it.
Gov. Gavin Newsom was among the measure’s first high-profile opponents, working behind the scenes in an unsuccessful bid to keep it off the ballot entirely. He later backed Prop. 42, the billionaire-funded countermeasure designed to block wealth taxes altogether and neutralize Prop. 40. Newsom was joined by other Democratic-aligned groups, including Planned Parenthood of California and the California Teachers Association, who argued a one-time tax wouldn’t fix the state’s deeper budget problems and could push wealthy residents to relocate.
On the other side, the California Democratic Party and the California Federation of Labor Unions backed Prop. 40 and opposed the countermeasures, saying the state needs new revenue sources to protect residents from the fallout of federal healthcare cuts expected to strip roughly 2 million Californians of their insurance coverage.
Lorena Gonzalez, president of the California Federation of Labor Unions and a former state Assemblymember, said the measure’s failure only increases the pressure on state and federal officials to find another way to cover the gap left by Medicaid cuts.
Supporters of Prop. 40 largely attributed its defeat to being vastly outspent. The Yes campaign raised about $33.5 million, a fraction of what opponents poured into the race.
“That is incredibly corrosive and corrupting to our democracy and our political system, and that’s been dominating the discussion here in California,” Regan said.
Billionaire opponents spent an eye-popping $378.4 million combined to defeat the measure. Google co-founder Sergey Brin emerged as the most visible figure in that effort, publicly relocating out of state and contributing $102 million to Building a Better California, a political committee he created specifically to fight the tax. That committee also helped fund the competing measures, Propositions 41 and 42.
Abby Lunardini, a spokesperson for Building a Better California, said the billionaire tax risked shrinking revenue for all state services, including healthcare, by driving wealth and jobs out of California.
“It was a lose-lose for California, and voters clearly agreed,” Lunardini said.
Polling in the run-up to the election suggested support for Prop. 40 was softening even as more Californians expressed general support for taxing billionaires. A UC Berkeley Citrin-POLITICO poll found that 45% of voters favored taxing billionaires more heavily to fund public services, compared to 35% who prioritized keeping wealthy residents and their tax dollars in the state — yet only 46% said they supported Prop. 40 specifically.
USC economist and direct democracy expert John Matsusaka said ahead of the election that infighting among Democrats likely played a role in the measure’s downfall. While research shows that campaign spending rarely changes people’s minds on deeply held issues like abortion, he said, it can be highly effective at exploiting voter uncertainty.
“People these days are very tribal. When your tribe is arguing, people start to listen to the counterarguments,” Matsusaka said.
Original source: CalMatters
