California's Proposition 40, a one-time 5% wealth tax on billionaires, appears headed for defeat, with 56% of voters voting no while votes are still being counted. The healthcare union that sponsored the measure all but conceded defeat Tuesday night and said it would try again in 2028 unless the legislature acts. With Democrats set to control both chambers of Congress, tax experts expect a push for federal tax hikes on high earners; plans for a federal wealth tax could also get more attention.
Proposition 40 would have imposed a one-time levy of 5% on the net worth of Californians worth over $1 billion. Two ballot measures, Propositions 41 and 42, designed to limit revenue use and prevent any state taxation of personal assets, were both showing majority support. Under the rules, if either measure receives more votes than the billionaire tax, the tax is defeated.
In Washington State, voters supported a measure that would impose a 9.9% millionaire tax on household income of more than $1 million a year. In Colorado, a plan to replace the flat tax with a graduated income tax topping at 8.4% for income over $1 million remained too close to call.
With Democrats set to hold both the House and Senate, tax experts anticipate a flurry of proposals to raise taxes on high earners and reduce taxes for lower- and middle-income households. Howard Gleckman, a nonresident fellow at the Tax Policy Center, said, "It is clear Democrats will try to lower taxes for middle-income households and raise taxes on certain businesses and high-income households. But it is much too soon to know how."
Senators Chris Van Hollen, D-Md., and Cory Booker, D-N.J., have floated plans similar to those advanced last year. Van Hollen's plan would create a graduated surtax on income over $1 million, starting at 5% for income between $1 million and $2 million and rising to 12% for income above $5 million, pushing the top marginal rate to 49%. He also proposed raising the capital gains top rate from 23.8% to 35.8%. The hikes would be offset by a tax cut creating a new exemption of $46,000 for single filers and $92,000 for joint filers. Booker's plan would set a top rate of 43% and more than double the standard deduction to $37,500 for single filers and $75,000 for joint filers.
Representative Ro Khanna, D-Calif., and Senator Bernie Sanders, I-Vt., have proposed the “Make Billionaires Pay Their Fair Share Act,” an annual 5% tax on the total net worth of those worth more than $1 billion, unlike California's one-time levy.
Garrett Watson, vice president of federal tax policy at the Tax Foundation, noted a key debate over how to prioritize cuts given the deficit and Democratic spending priorities. He said, "A key question is the debate about how much to prioritize further cuts at all, given the revenue needs for the deficit situation and the Democrats' spending priorities."
President Trump would likely veto any Democratic tax plan, especially those targeting the 2017 Trump tax cuts, which were extended and expanded last year. The Tax Foundation said in a report, "Proposals made in 2027 will shape the direction of policy in the future. While their ambitions to raise taxes will be limited by President Trump's veto, these proposals will serve as messaging and discussion vehicles over the next two years on the direction of the tax code."
Analysis
Why This Matters
- California's rejection of a wealth tax may signal voter skepticism toward such levies, but the union backing it vowed to press again, and federal Democrats appear emboldened.
- The outcome could shape the tax debate in the 2028 election, especially if Democrats introduce high-profile proposals in the next two years.
- Mixed results in other states, Washington approving a millionaire tax, Colorado's vote too close, show varying public appetite for taxing the wealthy.
Background
California's Proposition 40 was a ballot initiative in the November 2026 general election, proposing a one-time 5% tax on the net worth of billionaires. It was sponsored by the Service Employees International Union-United Healthcare Workers West. Similar federal proposals, including annual wealth taxes, have been floated by Democratic lawmakers in recent years. The current federal tax code is shaped by the 2017 Trump tax cuts, extended in 2025.
Key Perspectives
- SEIU-United Healthcare Workers West: conceded defeat and said they will try again in 2028 unless the legislature takes action to "make billionaires pay their fair share."
- Howard Gleckman (Tax Policy Center): said it is clear Democrats will try to lower taxes for middle-income households and raise taxes on certain businesses and high-income households, but it is too soon to know how.
- Garrett Watson (Tax Foundation): highlighted the debate over prioritizing cuts given the deficit and Democratic spending priorities.
- Tax Foundation: said proposals made in 2027 will shape future policy direction, serving as messaging vehicles.
- President Trump (implied veto threat): would likely veto any Democratic tax plan targeting the Trump-era tax cuts.
What to Watch
- Final certification of California's Proposition 40 and the two poison-pill measures.
- The outcome of Colorado's income tax ballot measure, which remained too close to call.
- Introduction of federal tax proposals in early 2027, particularly the Khanna-Sanders annual wealth tax and the Van Hollen and Booker surtax plans.
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- SupportedCalifornia’s Proposition 40 is likely to fail, while tax experts expect federal tax hikes on high earners.US Top News and Analysis: “The likely defeat of the California billionaire tax may energize Democrats in Congress to propose federal tax hikes on high earners along with a potential federal wealth tax, according to tax experts.”
- SupportedWashington State voters supported a measure imposing a 9.9% tax on household income above $1 million a year.US Top News and Analysis: “In Washington State, voters supported a new "millionaire tax," which would impose a 9.9% tax rate on household income of more than $1 million a year.”
- SupportedColorado’s plan to replace its flat tax with a graduated income tax was too close to call.US Top News and Analysis: “In Colorado, the passage of a plan to replace the flat tax of 4.4% with a graduated income tax with a top rate of 8.4% on income over $1 million, is too close to call.”
- SupportedWith votes still being counted, 56% of California voters had voted no on Proposition 40.US Top News and Analysis: “While the votes in California are still being counted, 56% of the state's voters have voted "no" on the billionaire tax while 44% voted "yes."”
- SupportedThe union that sponsored Proposition 40 all but conceded defeat Tuesday night and said it would try again in 2028 unless the legislature acted.US Top News and Analysis: “Service Employees International Union-United Healthcare Workers West, the healthcare union that sponsored the billionaire tax proposal, all but conceded defeat Tuesday night, saying they will try again in 2028 unless the legislature takes action”
- SupportedProposition 40 would have imposed a one-time 5% levy on the net worth of Californians worth more than $1 billion.US Top News and Analysis: “The tax, known as Proposition 40, would have imposed a one-time levy of 5% on the net worth of Californians worth over $1 billion.”
- SupportedPropositions 41 and 42 were both showing majority support, and either receiving more votes than Proposition 40 would defeat it.US Top News and Analysis: “Proposition 41 and Proposition 42, which limit revenue use and prevent any state taxation of personal assets, are both showing majority "yes" votes. If either gets more votes than the billionaire tax, the billionaire tax is defeated.”
- SupportedHoward Gleckman said, “It is clear Democrats will try to lower taxes for middle-income households and raise taxes on certain businesses and high-income households. But it is much too soon to know how.”US Top News and Analysis: “"It is clear Democrats will try to lower taxes for middle-income households and raise taxes on certain businesses and high-income households," said Howard Gleckman, nonresident fellow at the Tax Policy Center. "But it is much too soon to know how."”
- SupportedVan Hollen’s plan would impose a graduated surtax starting at 5% on income between $1 million and $2 million and rising to 12% on income above $5 million.US Top News and Analysis: “Van Hollen's plan calls for a new graduated surtax on those earning more than $1 million, starting with a 5% surtax for those making between $1 to $2 million and rising to 12% for those earning more than $5 million a year.”
- SupportedBooker’s plan would set a top rate of 43% and standard deductions of $37,500 for single filers and $75,000 for joint filers.US Top News and Analysis: “Booker's plan is similar, but would increase the top rate to 43% and more than double the standard deduction to $37,500 for single filers and $75,000 for joint filers.”
- SupportedGarrett Watson said, “A key question is the debate about how much to prioritize further cuts at all, given the revenue needs for the deficit situation and the Democrats' spending priorities.”US Top News and Analysis: “"A key question is the debate about how much to prioritize further cuts at all, given the revenue needs for the deficit situation and the Democrats' spending priorities," said Garrett Watson, vice president of federal tax policy at the Tax Foundation.”
- SupportedThe Tax Foundation said proposals made in 2027 will shape future policy, while Trump’s veto would limit their ambitions to raise taxes.US Top News and Analysis: “"Proposals made in 2027 will shape the direction of policy in the future," the Tax Foundation said in a report. "While their ambitions to raise taxes will be limited by President Trump's veto, these proposals will serve as messaging and discussion vehicles over the next two years on the direction of the tax code."”