Proposition 40 and the question at the heart of America’s safety net: Who should pay?

Backed by a coalition of more than 300 labor unions, healthcare advocates, economic justice groups, faith organizations, and community-based nonprofits, Proposition 40 became one of the most closely watched tax measures in California’s history.

The ballot initiative would have imposed a one-time 5 percent tax on residents with fortunes exceeding $1 billion, directing most of the revenue toward healthcare and other public services. This week, the measure was rejected by voters with a 52.8 percent voting against it. But regardless of the outcome, the proposal sparked a broader debate extending far beyond California: Who should pay for essential public services at a time of growing federal cutbacks and widening economic inequality?

The scale of wealth inequality

The proposed amendment emerged in direct response to major federal spending reductions approved in 2025 that are expected to impact healthcare, food assistance, and other programs that millions of Californians depend on. For supporters of the measure, Proposition 40 represented an effort not only to protect those services but also to rethink how states can respond when growing social needs collide with shrinking federal support.

“We did everything we could to stop Congress from passing those cuts. And when that failed, we asked ourselves: Is there anything else we can do to prevent this enormous attack on our healthcare system? In California, you have the ability to take issues directly to voters,” Dave Regan, president of SEIU-United Healthcare Workers West (SEIU-UHW), told NPQ.

The ballot initiative originated with SEIU-UHW, which first developed the proposal and launched the effort to place it before California voters. Regan explained that, after federal healthcare cuts were approved, the union began looking for ways to replace the lost funding and ultimately advanced the measure that became Proposition 40.

According to Regan, the proposal was conceived as a temporary, five-year response to an immediate crisis, not a permanent solution. He said the size of the funding gap was so large that addressing it required looking at the state’s wealthiest residents as a source of revenue. California, he noted, is home to roughly 250 billionaires, making them the logical target of a measure intended to generate billions of dollars for healthcare and other essential services.

If approved, Proposition 40 would have become the first successful tax in US history aimed directly at accumulated wealth rather than annual income. Supporters argued that this distinction was critical because many of the wealthiest people in the United States derive much of their fortunes from appreciating assets and stock holdings, allowing them to report relatively little taxable income while their wealth continues to grow.

Chris Hoene, executive director of the California Budget & Policy Center, told NPQ that the initiative was fundamentally about replacing resources California standed to lose through federal cuts. “There’s no way the state can provide that level of services or help people maintain health insurance and cash support without additional revenue,” Hoene said.

California…embodies a profound contradiction: It is home to some of the wealthiest people in the world while many residents continue to struggle.

According to Hoene, federal cuts could leave between two and three million Californians without health insurance, while also jeopardizing food assistance and other support programs for low-income families. In a policy brief, the center argued that there is a strong rationale for taxing accumulated wealth given the scale of wealth inequality and the vast unmet needs that persist in California—and across the country.

The organization noted that some ultrawealthy households are able to pay relatively little in income taxes as a share of their wealth, even as their assets continue to grow. A significant share of the revenue that would have been generated by Proposition 40 was for Medi-Cal, California’s Medicaid program, which currently serves roughly one in three Californians. At the same time, the report acknowledged that a state-level wealth tax carries risks, particularly the possibility that some wealthy residents could leave California to avoid paying the tax, reducing future income tax revenues and potentially affecting long-term funding for public services.

Kiran Savage-Sangwan, executive director of the California Pan-Ethnic Health Network, told NPQ that the proposal is about more than protecting healthcare funding. California, she argued, embodies a profound contradiction: It is home to some of the wealthiest people in the world while many residents continue to struggle with housing, healthcare, and economic insecurity.

“California has some of the richest people in the world and one of the highest poverty rates in the country,” Savage-Sangwan said. She also warned that without new revenue, healthcare providers could face growing instability, particularly in rural and underserved communities. Hospital closures, service reductions, and pressure on local healthcare systems are among the risks advocates say California faces if it cannot offset federal cuts.

Billionaire opposition and the fight over the narrative

Opponents spent hundreds of millions of dollars on an extensive campaign aimed at defeating the measure. Television advertisements, digital campaigns, and mailers warned voters that the proposal would damage California’s economy, encourage wealthy residents to leave the state, and ultimately reduce investment.

One of the most visible figures in the opposition campaign was Sergey Brin,  Google’s co-founder and one of the world’s wealthiest individuals. Brin contributed $20 million to Building a Better California, a political organization backed by venture capitalists and billionaire tech executives that argued California’s affordability crisis should be addressed through housing and economic reforms rather than new taxes on wealth.

Concerns about wealthy individuals leaving became one of the campaign’s central themes, with figures including Mark Zuckerberg publicly raising that argument during a debate. Brin’s involvement in the opposition became especially symbolic after The New York Times reported that he had moved his residence to the Nevada side of Lake Tahoe before the residency cutoff date, established by the proposal, allowing him to avoid the tax should it be approved.

“The economy has to work for everyone. The idea that some billionaires might leave the state is distracting from a much more important reality: Low-income people are already being forced to move. They’re having to move farther and farther away from where they work or where they receive healthcare because that’s where housing is affordable,” Cori Racela, executive director at the Western Center on Law & Poverty, told NPQ.

While wealthy individuals often have multiple homes and broad choices about where to live, Racela said many working families are already being displaced by rising housing costs.

The campaign financed by Brin and other billionaires was successful in blocking the tax, arguing that the measure would undermine California’s competitiveness and discourage high-income taxpayers from maintaining residency in the state.

Savage-Sangwan rejected those concerns, emphasizing that billionaire-funded campaigns relied heavily on fear-based messaging. She pointed to what supporters described as a costly disinformation campaign that sought to convince voters that the proposal would trigger economic decline, reduce public revenues, and harm public services.

Billionaires contended that the measure sets a dangerous precedent by taxing wealth rather than income, opening the door to future taxes on other forms of personal assets, including retirement accounts and family savings.

Those arguments did not remain confined to campaign advertising. Billionaire-backed groups also advanced Propositions 41 and 42, which supporters of Proposition 40 view as an effort to limit California’s ability to impose future taxes on wealth and certain forms of personal assets. Proposition 42, which bans new taxes on personal property, was approved by voters, while Proposition 41, as of this writing, is projected to lose, which would make it harder to pass new taxes by requiring state audits.

The election became more than a referendum on a single proposal; it evolved into a larger struggle over whether the state should have the authority to use wealth-based taxation to fund public services in the future.

“I think one of the things that confused people the most was all the messaging suggesting that this tax would eventually apply to them, even if they weren’t billionaires. It was simply confusing for voters, and those arguments gained enough traction,” Regan said.

A debate beyond California

For supporters, Proposition 40 carried significance far beyond state borders. A successful vote would have demonstrated that states do not have to passively accept federal retrenchment. Instead, they can develop their own revenue sources.

The campaign revealed a growing willingness among voters to consider asking the ultrawealthy to contribute more toward the public systems on which millions depend.

The debate surrounding Proposition 40 also reflected a broader shift in US politics. At a time when concerns about affordability, healthcare access, housing costs, and economic insecurity are increasingly shaping public opinion, supporters argue that voters are paying closer attention to questions of wealth concentration and fiscal fairness.

“As billionaires become more visible and prominent, it highlights the huge gap between the haves and the have-nots, between people who are struggling to make ends meet and those who can do virtually whatever they want,” Racela said.

“What I think we’ve shown is that this issue can win, even if we don’t win this time. We’re prepared to come back in 2028,” Regan said. He argued that, considering the unprecedented level of spending by billionaire opponents—roughly $500 million—even a loss by eight or nine percentage points makes the campaign a meaningful victory. Though the measure ultimately fell short, the campaign revealed a growing willingness among voters to demand the ultrawealthy to contribute more toward the public systems on which millions depend.

The measure forced Californians to confront questions that extend well beyond taxation: who benefits from economic growth, who should pay for public goods, and how a democracy should balance private wealth with collective responsibility. A balance that many billionaires appear unwilling to accept.