On Nov. 3, Californians will decide whether to impose a wealth tax on the state’s richest residents, which proponents say will fill holes in state budgets, and which opponents warn will drive entrepreneurs and investment out of the state.
Proposition 40, the so-called “billionaire tax,” would impose a one-time 5 percent tax on the assets of an estimated 260 residents who have more than $1 billion in net worth, according to California Billionaire Wealth Tracker, which monitors the Forbes Real-Time Billionaires list.
The tax is supported by the California Democratic Party, Sen. Bernie Sanders (I-Vt.), and unions including Teamsters California, AFSCME California, and Service Employees International Union-United Healthcare Workers West, the group that put the measure on the ballot. Supporters projects that the wealth tax would raise roughly $100 billion over five years, and fund healthcare, food assistance, and education, which faced federal funding cuts under the One Big Beautiful Bill Act passed in 2025.
The tax is opposed by many Silicon Valley entrepreneurs and the California Business Roundtable, who argue that the measure would cause wealthy residents to leave California, decreasing tax revenue in the long run. Two counter measures, Propositions 41 and 42, placed on the ballot by opponents of the wealth tax, would nullify Proposition 40 if approved.
Supporters of the tax say that relying on income taxes alone provides a loophole for the richest residents, whose wealth comes from equity holdings or other assets, rather than income. The fact that the proposed tax is back-dated and would apply retroactively to billionaires who resided in California as of Jan. 1, 2026, is designed to capture revenue from anyone who leaves the state after that date.
How many wealthy residents would leave the state if the wealth tax passes remains a subject of debate, but California already experienced a net outflow of about 3 million people between 2010 and 2024, according to the Public Policy Institute of California. According to VoteWithYourFeet, a think tank that analyzes intra-state immigration, more than $114 billion in personal income left California due to out-migration between 2012 and 2023.
Several of California’s high-profile billionaires have already taken their business elsewhere, including Google co-founders Larry Page and Sergey Brin, who left California in December 2025.
Likewise, an Oct. 21 regulatory filing from Meta stated that, if Proposition 40 passes, CEO and founder Mark Zuckerberg “could become liable for a significant, multi-billion-dollar tax payment based on his ownership of stock in the Company. In light of this potential tax exposure, Mr. Zuckerberg informed the Special Committee that he was evaluating relocating his primary residence outside California.”
In Zuckerberg’s case, the move would be too late to avoid the Proposition 40 tax, but could shield him from future attempts to tax wealth in California. Meta announced in its filing that it had approved a special class of stock that he could sell to pay any wealth tax due.
Critics say that much of the wealth that Proposition 40 seeks to capture is held in illiquid assets, like company stock, that would have to be sold to pay the tax. According to the bill, taxpayers who are hit by the charge could elect to pay the tax in five annual installments, with a 7.5 percent annual deferral charge on the unpaid balance.
And although the tax liability would nominally be 5 percent of a resident’s assets, the actual tax bill could in some cases prove to be far higher than that.
According to the Tax Foundation, a nonprofit think tank, Proposition 40 mandates that residents would also be taxed on their illiquid voting shares, which cannot be sold but are often held by founders to ensure their ongoing involvement with the company. They cite the example of Tony Xu, the founder of DoorDash, who owns 2.6 percent of his company but controls 57.6 percent of the vote, making him potentially liable for $2.62 billion in state taxes on an ownership interest worth $2.41 billion.
Because Xu would have to pay capital gains taxes on any shares he sells, his total tax liability could reach $4.17 billion, or 173 percent of the value of his ownership stake, potentially rendering Xu bankrupt.
“The consequences of founders relinquishing control and dumping vast holdings, moreover, would be significant—in some cases, potentially catastrophic—for employers and investors as well,” The Tax Foundation states.
Californians appear inclined to vote against the new wealth tax. According to a poll conducted by the Public Policy Institute of California from Oct. 16 to 22, 46 percent of those polled said they would vote “yes” on Proposition 40, while 51 percent said they would vote for Proposition 42, which prohibits new state property taxes.
