California voters had a chance to impose the nation’s first-ever tax on billionaires’ assets. Instead, they voted to ban wealth taxes altogether.
A ballot initiative to prohibit new state taxes on personal property is set to pass, the Associated Press said late Friday. Known as Proposition 42, the measure was leading by a 2.6-point margin with an estimated 96% of votes counted following the Nov. 3 election, AP said.
The outcome represents a coup de grâce for the one-time, 5% tax on California billionaires’ net assets that also appeared on the November ballot. Proposed by a healthcare-workers’ union to offset looming Medicaid cuts, the billionaire tax, known as Proposition 40, fell short of the majority needed to pass, the AP said on Nov. 9.
Proposition 42 was one of several ballot measures funded by billionaires including Google co-founder Sergey Brin, venture capitalist John Doerr and Stripe co-founder Patrick Collison as part of a nearly $400 million effort to defeat the proposed wealth tax. It was one of two that garnered enough voter signatures to be placed on the ballot, but voters turned down the other measure.
These rival ballot initiatives contained language that would have conflicted with the billionaire tax. The countermeasures also forced the healthcare union to spend most of its available funds earlier this year gathering signatures. That left tax proponents with scant resources to rebut the billionaires’ barrage of attack ads, text messages and mailers claiming that the levy was a step toward taxing ordinary Californians’ retirement accounts.
Proposition 42 could make it harder for progressives to do something they’ve said remains on their agenda: taking another swing at taxing billionaires’ wealth.
The newly passed initiative prohibits California from imposing new taxes on financial assets or other personal property, besides real estate. Since it will amend the state constitution, it presents a major hurdle for state lawmakers to tax wealth via legislation, should they ever wish to do so.
Still, thanks to California’s robust allowances for direct democracy, Proposition 42 may not stop proponents from trying another wealth-tax ballot initiative.
Progressives say they learned important lessons in the failed California campaign and remain committed to taxing billionaires’ wealth. The head of the healthcare union that proposed the California billionaire tax has already floated putting a similar measure on the ballot in 2028 if the Medicaid cuts remain in effect.
“Just as the billionaires amended the constitution to prevent a future wealth tax, the citizens of the state can amend the constitution to allow and impose one in a single constitutional amendment,” said Robert “Perl” Perlmutter, a partner at San Francisco law firm Shute, Mihaly & Weinberger.
