California voters will decide in November whether to impose a one-time tax on the net worth of billionaires who were California residents on January 1, 2026.
Proposition 40 would raise potentially tens of billions of dollars and direct most of that money towards healthcare.
But some major healthcare organizations that could benefit from the tax are campaigning against it because of concerns that there aren’t enough safeguards in place to ensure the money is spent as intended.
What would Prop 40 do?
The measure would impose a one-time 5% tax on the wealth of Californians with at least $1 billion in assets. Supporters estimate it could generate $100 billion.
It also allows the Legislature, with a two-thirds vote, to make changes to the tax as long as those changes are “consistent with and furthers the purposes” of the measure. How far that authority extends is disputed.
The tax would be due in 2027, although billionaires could choose to pay over five years for a fee.
As written, 90% of money raised by Prop 40 would go into a special fund for healthcare programs with the remaining 10% being split between education, food assistance and the cost of administering the tax.
The ballot measure also states that money cannot be used as a justification for reducing, eliminating or failing to increase state appropriations for those programs.
Lorena Gonzalez, president of the California Federation of Labor Unions, said her organization supports the measure because the state needs additional money to keep hospitals and other providers operating as federal funding declines.
“We rely on this funding source in order to keep hospitals operational, especially emergency rooms and maternity wards,” Gonzalez said. “And we need that money in order to keep these hospitals fully staffed and make sure people have that access.”
Supporters argue the measure would provide a temporary source of money to help fill that gap.
But some healthcare organizations aren’t convinced that this approach will lead to long-term benefits.
Planned Parenthood concerns
Jodi Hicks, CEO of Planned Parenthood Affiliates of California, said her organization isn’t against taxing billionaires. The problem she sees with Proposition 40 is it’s not clear about how the money would be distributed.
“We don’t want it to be dependent on who has the biggest advocacy voice in the Legislature versus how we’re really looking at things as a whole and where patients go,” she said.
Hicks also said the initiative was developed without enough input from healthcare providers, including Planned Parenthood, and pointed to other healthcare funding measures like Proposition 35 as examples of specific rules for money distribution.
That measure was approved by voters in 2024. It made a tax on health plans permanent and established rules directing how some of that money must be spent on specific Medi-Cal services.
How money gets distributed is important for her organization, she said, because the organization has already dealt with massive federal cuts.
Hicks pointed to a roughly $435 million gap after her organization was temporarily cut from Medicaid funding.
Hicks said she hasn’t had any discussions with state lawmakers on how much of the money would go to her organization.
However, several Planned Parenthood workers have publicly challenged their organization's leadership over its opposition to the measure, signing a letter to Hicks expressing their concerns.
California Medical Association concerns
The California Medical Association is concerned that the Legislature could have too much discretion over how the money is used.
“You could have the next big bill for high speed rail or for who knows what and you have all this pressure, and the Legislature has choices, right?” CEO Dustin Corcoran said during a No on Prop 40 media briefing in September. “They can cut other programs, they can raise taxes or they can grab this money.”
The medical association’s formal position is that the proposed billionaire’s tax does not guarantee the new revenue would result in additional healthcare spending.
The organization argues — despite provisions in the measure intended to prevent this — lawmakers could reduce existing funding commitments for health programs and use money raised from the tax to backfill those cuts.
Instead, Corcoran argues that California needs a stable and sustainable source of healthcare funding instead of a one-time infusion of money. His concerns are shared by other healthcare groups opposing the measure, including the California Primary Care Association and California Children's Hospital Association.
Supporters say the language is clear
SEIU-UHW, the healthcare workers union that sponsored Proposition 40, rejects that interpretation.
Suzanne Jimenez is the union’s chief of staff. She said the measure explicitly restricts how the money can be spent.
“The language is very clear,” Jimenez said. “Ninety percent of it has to go towards healthcare. Ten percent of it goes to emergency food stamps and education.”
Jimenez also said the campaign reached out to healthcare organizations — including the California Medical Association — during the initiative process and gave them an opportunity to suggest changes.
“No one offered amendments when we reached out and they could have put in any feedback,” Jimenez said. “This whole narrative that there wasn’t an opportunity, it’s just not true.”
But there’s another major disagreement over the measure, which is how much money it could actually raise.
What do economists say?
UC Berkeley economist Emmanuel Saez, one of the measure’s proponents, estimates California billionaires currently only pay roughly $3 billion a year in state income taxes.
He said that’s because much of their wealth is tied up in assets — including company stock — instead of wages or other income subject to the state’s income tax.
“The problem of the California tax system is that billionaires can largely escape that individual income tax because they don’t get a paycheck, they don’t realize income,” Saez said. “So, we need something else to target the billionaires.”
But the amount of money Proposition 40 would actually produce is disputed.
A Hoover Institution analysis puts the potential revenue substantially lower than Saez's $100 billion estimate— at around $40 billion — and predicts the state could lose as much as $25 billion after accounting for reduced income-tax revenue.
Jonathan Hartley is an economist at the University of Texas at Austin and a policy fellow at the institution.
He said the analysis assumes California’s billionaires currently generate substantially more income-tax revenue for the state than Saez estimates.
“So many people have left that it may in fact be a net negative in the sense that more tax revenue is leaving than such a wealth tax, if it were to be implemented, would bring in,” he said.
Hartley pointed to Meta CEO Mark Zuckerberg and Nvidia CEO Jensen Huang as examples of billionaires who pay a lot in income taxes. However, that’s difficult to verify because their tax records are not publicly available.
But an analysis from the nonpartisan Legislative Analyst’s Office falls between the competing campaign estimates. It projects tens of billions of dollars in temporary revenue but also says the state could see an ongoing reduction in income-tax revenue of less than $1 billion a year.
That leaves voters to weigh the competing claims about how much money the measure could raise and how it would affect healthcare.
California voters are split.
The measure has also become a major political and financial fight with recent polling suggesting a relatively close contest.
The Public Policy Institute of California’s September survey found 52% of likely voters supported Proposition 40 while 46% opposed it.
Sacramento State student Abigail Everett said she’s voting Yes on Prop 40.
“Billionaires get too many tax breaks and I would like California’s tax dollars to go back into our system of education and healthcare,” the 20-year-old said.
Matthew Lenz, 27, said he supports the measure because of the money it could generate for education.
“We’ve seen with the federal government lately that we can’t rely on them for funding for certain things,” he said. “I personally work in the education system and so I’ve seen funding be removed, so I’m not opposed to funding that ourselves or finding a way to become more independent, especially with how large California is.”
Seventy-two-year-old Sandy Jakob is voting no because she doesn’t believe billionaires should pay for the state’s financial mistakes.
“California mismanaged themselves and made themselves into a big hole,” she said. “And they’re trying to dig it out and using people that have made a whole bunch of money.”
Michael, who didn’t want to share his last name, said he’s concerned that the wealth tax could be applied to everyone — not just billionaires.
“They can tax us as well, not just the billionaires,” he said. “So it’s that, that’s the sticking point.”
There is no provision within the measure that allows lawmakers to tax the wealth or assets of ordinary Californians.
Opponents have separately argued that Proposition 40 could make it easier to impose wealth taxes in the future by changing constitutional rules.
There are also two other measures on the November ballot that could affect Prop 40.
Proposition 41 would require audits of programs funded by new special taxes. Proposition 42 would prohibit new state taxes on personal property, including financial assets.
Prop 40 would be invalidated if either passes and gets more votes.
