California’s billionaire tax, Proposition 40, was losing when we last checked the count on Wednesday. With roughly 60% of the expected vote counted, it trailed by more than 11 points, and the union behind it had already said it would try again if lawmakers don’t act. On the same ballot, voters appeared to be approving Proposition 42, a constitutional amendment written to block wealth taxes, and Proposition 3, which makes the state’s top income tax rates permanent.
Most people searching “California billionaire tax” aren’t billionaires. They want to know whether this affects them, whether a wealth tax could come back for lower net worths, what Proposition 42 does to retirement accounts, and whether the top income tax rates just went up. This guide answers those questions with the measures’ actual terms, a high-earner tax calculator, and a residency day counter for anyone thinking about leaving the state.
Eight Straight Answers About the Billionaire Tax
The short version of what most people are asking this week.
It was losing by more than 11 points on Wednesday with about 60% counted, and hadn’t been formally called.
Only if your net worth tops $1 billion. It targeted about 200 California residents and certain trusts.
No. Prop. 3 keeps existing top rates past 2030. It affects income above roughly $371,000 single or $742,000 joint.
It bans new state taxes on owning personal property such as stocks, businesses and retirement accounts, and bars retroactive taxes.
Not by Prop. 40, which never reached ordinary savers. Prop. 42 would bar a future state tax on simply owning those accounts.
Supporters said about $100 billion. The Legislative Analyst’s Office estimated tens of billions over several years.
The union says it plans another try in 2028. If Prop. 42 is certified, a new wealth tax would first need to undo it.
California counts for weeks. The Secretary of State certifies statewide results in December.
Where the Count Stands
California counts mail ballots for weeks, so early leads can narrow. Here’s the picture from reported returns on Wednesday, 4 November.
We compared the returns reported by several outlets on Wednesday, and they told the same story with slightly different numbers. Prop. 40 was down by roughly 11 to 13 points; an afternoon report put it more than 11 points behind with about 60% of votes counted, and the race hadn’t been formally called. Prop. 42 led with around 54%, Prop. 41 trailed with about 48% yes, and Prop. 3 was ahead, with some outlets already reporting it as approved. SEIU-UHW leaders effectively conceded as polls closed and said they’d return in 2028 if the Legislature doesn’t come up with what they called a real solution for healthcare funding.
A note on what “conflicting measures” means here. Props. 41 and 42 were drafted so that if either passed with more yes votes than Prop. 40, it would block the wealth tax. With Prop. 40 losing outright, that rule no longer decides anything for the billionaire tax. But Prop. 42 matters on its own: if it’s certified, its ban on wealth taxes becomes part of the state constitution.
What Prop. 40 Would Have Done
Even though it’s losing, the details matter: they explain the arguments on both sides, and any 2028 version is likely to start from this design.
Who: residents and trusts worth more than $1 billion
The tax applied to people who were California residents on 1 January 2026, and to certain trusts, with net worth above $1 billion. That’s roughly 200 people. Using an earlier residency date was designed to stop billionaires leaving the state after the measure was announced from escaping it.
What: a one-time 5% of net worth
Net worth would be measured as of 31 December 2026 and would cover stocks, bonds, business interests and other valuable personal property, such as art and collectibles. It was a one-time charge, not an annual tax.
How: lump sum or five-year instalments
Taxpayers could pay all at once or spread payments over five years.
Where the money would go
Mostly to state healthcare programs, with a smaller share for food assistance and education, to offset recent federal health funding cuts. The measure was written to sit outside the state’s 1979 spending limit so the money could be spent on those programs.
How much money it would have raised
The two main estimates were far apart. SEIU-UHW said the tax would raise about $100 billion. The nonpartisan Legislative Analyst’s Office estimated “tens of billions of dollars” over several years, and said billionaires leaving the state could reduce income tax revenue by less than $1 billion a year. Opponents cited a Hoover Institution analysis arguing the long-run net effect could be negative once lost income taxes from departing residents are counted; one of the measure’s authors, law professor David Gamage, disputed that reading. The disagreement mostly comes down to two hard questions: how to value private companies and illiquid assets, and how many billionaires would leave or already had.
Props. 41 and 42: The Countermeasures, Explained
These two were placed on the ballot by the billionaire tax’s opponents. They don’t just block Prop. 40; if approved, they change California’s tax rules going forward.
| Measure | What it does | Who backed it | Early status | Long-term effect if certified |
|---|---|---|---|---|
| Prop. 40 | One-time 5% tax on net worth over $1B for residents on 1 Jan 2026 | SEIU-UHW, California Democratic Party, state labor federation | Trailing, ~44% yes | None if it fails |
| Prop. 41 | Blocks new taxes that sit outside the 1979 state spending limit; requires audits of future tax proposals before they reach voters | Billionaire tax opponents | Trailing, ~48% yes | None if it fails |
| Prop. 42 | Bans new state taxes on owning personal property such as financial assets, business interests and retirement accounts; bars retroactive and residency-based taxes; voids conflicting taxes enacted after 1 Jan 2026 | Billionaire tax opponents; endorsed by Gov. Newsom | Leading, ~54% yes | A future wealth tax would first need a new constitutional amendment |
| Prop. 3 | Makes the 10.3%–12.3% top income tax brackets permanent instead of expiring after 2030 | School and health funding advocates; opposed by the Howard Jarvis Taxpayers Association | Leading, ~58% yes | Keeps $5B–$15B a year flowing |
Prop. 42 is the measure with the biggest lasting effect for ordinary savers, even though it was written with billionaires in mind. In plain terms, it stops the state from taxing you simply for owning things like brokerage accounts, a stake in a private business, or a retirement account. It doesn’t change taxes on income from those assets: dividends, interest, capital gains when you sell, and retirement withdrawals are still taxed as income in California. It also doesn’t touch local property taxes on real estate, which are governed by separate rules.
Supporters of Prop. 42, including Governor Gavin Newsom, said it would protect savings and keep entrepreneurs in the state. Opponents, including the California Democratic Party and labor federation, said it would lock in a constitutional ban that limits how future lawmakers and voters can raise money, especially as federal healthcare cuts take effect.
Prop. 3: What Happens to California’s Top Income Tax Rates
If you earn a high income, this is the measure that actually touches your tax bill. It doesn’t raise rates; it stops them from falling after 2030.
Voters first approved these higher brackets as Prop. 30 in 2012, then extended them through 2030 with Prop. 55 in 2016. According to the Legislative Analyst’s Office, they apply to income over about $371,000 for single filers, $742,000 for joint filers and $505,000 for heads of household, at 2025 levels, adjusted each year for inflation. The state describes the payers as roughly the top 2% of earners. The LAO estimates the rates bring in $5 billion to $15 billion a year, swinging widely with the stock market because so much high-end income comes from capital gains.
Without Prop. 3, those three brackets would have expired after the 2030 tax year, leaving 9.3% as the top regular rate. With Prop. 3 approved, they continue indefinitely, and only another statewide vote could end them. Separately, California’s 1% Mental Health Services Tax on income over $1 million, approved in 2004, still applies, which is why the top combined rate is 13.3%.
History helps explain why Prop. 3 fared so differently from Prop. 40. These higher brackets have been on the books since 2012, and voters already renewed them once: Prop. 55 passed in 2016 by about 63% to 37%. Making an existing tax permanent is a smaller ask than creating a new kind of tax, and pre-election polling showed Prop. 3 with majority support while Prop. 40 polled well below it. Critics, including the Howard Jarvis Taxpayers Association, said making the rates permanent broke the original promise that they would be temporary.
The Case Each Side Made
This was one of the most expensive and divisive ballot fights in California history, and it split Democrats as well as pitting labor against Silicon Valley. Here are the main arguments, as each side made them.
Supporters, led by SEIU-UHW and backed by the California Democratic Party, the state labor federation, Rep. Ro Khanna and Sen. Bernie Sanders, said California’s roughly 200 billionaires hold enormous wealth that is lightly taxed because much of it is unrealised gains that never show up as income. A one-time 5% levy, they argued, would ask the very richest to help replace federal healthcare funding cuts that threaten coverage for millions of Californians, without touching anyone else. They pointed to the 1 January 2026 residency date as a safeguard against people leaving to avoid it, and to the five-year payment option as a way to avoid forced asset sales.
Opponents, including Gov. Gavin Newsom, the California Teachers Association, Planned Parenthood of California, business groups and tech founders who funded the campaign, said a one-time tax wouldn’t fix an ongoing budget gap, and that billionaires who contribute heavily to income tax revenue had already started leaving and more would follow. They argued that valuing private companies and illiquid holdings would be unworkable and invite litigation, that taxing paper wealth could force founders to sell shares, and that the measure would discourage entrepreneurs from building companies in California. Several also argued the measure’s design, including its retroactive residency date, could face constitutional challenges.
Analysts were divided on the economic questions too. The Legislative Analyst’s Office expected tens of billions in revenue and a modest income tax loss from departures, while a Hoover Institution analysis argued the long-run effect could be negative. Those disagreements are likely to carry into any 2028 rematch.
Wealth Tax vs Income Tax: What’s the Difference?
Much of the confusion around these measures comes from mixing up taxes on what you earn, what you own and what you leave behind.
| Tax type | What’s taxed | California today | Effect of these measures |
|---|---|---|---|
| Income tax | Wages, business income, interest, dividends, realised capital gains | Yes, 1% to 12.3%, plus 1% over $1M | Prop. 3 keeps the top brackets permanently |
| Wealth tax | Total net worth, including unrealised gains | None | Prop. 40 trailing; Prop. 42 would ban new ones |
| Property tax | Real estate value (local) | Yes, about 1% of assessed value under Prop. 13, plus local levies | Not changed by these measures |
| Estate or inheritance tax | Assets passed at death | None at state level | Not on this ballot; federal estate tax still applies to large estates |
The key distinction is realisation. Income tax generally applies when you receive income or sell an asset at a gain. A wealth tax applies to what you own, whether or not you’ve sold anything. That’s why founders whose wealth is mostly in company stock objected so strongly to Prop. 40, and why supporters argued it was the only way to reach wealth that rarely becomes taxable income.
Planning Points for High Earners Now
With the top brackets now permanent if Prop. 3 is certified, these California-specific rules are worth knowing. Talk to a CPA before acting on any of them.
California taxes capital gains as ordinary income
There’s no lower state rate for long-term gains. A large sale can push you into the top brackets for that year, so spreading sales across years or pairing gains with losses can matter more here than in most states.
Some federal breaks don’t apply in California
California doesn’t follow the federal treatment of health savings accounts, so HSA contributions and earnings are taxable for state purposes. It also doesn’t follow the federal exclusion for qualified small business stock gains. Founders and early employees should plan for state tax on gains that may be partly tax-free federally.
California municipal bonds are state tax-free
Interest on California municipal bonds is exempt from California income tax, while interest on other states’ bonds is taxable. For top-bracket residents, that difference can be significant.
Retirement contributions still lower state taxable income
Contributions to 401(k)s and traditional IRAs generally reduce California taxable income the same way they reduce federal taxable income, which is worth more at a 10.3% to 13.3% marginal rate.
Moving is a tax event, not a tax escape
Leaving California before a big sale can reduce state tax, but the Franchise Tax Board scrutinises moves timed around liquidity events. Income earned while a resident, and some California-source income after you leave, stays taxable.
Top-Rate Tax Calculator and Residency Day Counter
The first tool shows what Prop. 3’s brackets mean for your California tax each year. The second checks your days in and out of the state if you’re thinking about moving.
Approximate 2025 thresholds. Doesn’t include credits or the federal deduction for state taxes.
A rough signal only. California looks at all your connections, not just a day count.
The calculator adds up the extra 1, 2 and 3 percentage points that the Prop. 3 brackets charge above the regular 9.3% rate, using the LAO’s approximate 2025 thresholds and the usual bracket spacing. For a single filer with $600,000 of taxable income, we found the Prop. 3 brackets account for roughly $3,800 a year of California tax. The ten-year figure is a simple multiple to show the stakes of making the rates permanent; real thresholds rise with inflation.
The day counter applies California’s rule that spending more than nine months of a tax year in the state creates a presumption you’re a resident. Fewer days don’t make you a non-resident on their own: the Franchise Tax Board weighs where your home, family, work, bank accounts, licences and doctors are. The “closest connections” choice is there to reflect that.
Which Situation Sounds Like Yours?
Very few readers will ever owe a wealth tax. Here’s what these measures mean for the situations most people are actually in.
Prop. 40 never applied to you. Prop. 3 is the relevant one: if your taxable income is above roughly $371,000 single or $742,000 joint, the top brackets you pay today now stay after 2030. Planning tools that reduce California taxable income, such as maximising retirement contributions, timing capital gains and charitable giving, matter more than ever. A California-savvy CPA can model your options.
A wealth tax on unrealised company stock was the part of Prop. 40 that worried founders most, because valuing private shares is hard and the tax could be due before any sale. With Prop. 40 losing and Prop. 42 leading, a state tax on simply holding equity is off the table unless voters later amend the constitution. Income tax still applies when you sell or exercise options, so plan the timing of liquidity events with an adviser.
Ads about protecting retirement savings referred to Prop. 42’s ban on taxing ownership of assets. Prop. 40 itself only reached billionaires. Your withdrawals from retirement accounts are still taxed as income by California, as before; Prop. 42 doesn’t change that.
If the ballot fight has you considering a move, make it a clean one. California’s Franchise Tax Board audits high earners who claim to have left. Change your driver’s licence, voter registration, vehicle registration, primary home, doctors and bank addresses; keep a calendar of days in each state; and be careful with income tied to California, such as a business, rental property or deferred compensation, which can stay taxable after you leave.
Prop. 40’s money was aimed at offsetting federal healthcare cuts that CalMatters reported could push about 2 million Californians off coverage. With it losing, how the state responds will come through the budget the governor proposes in January and the Legislature passes by June. Prop. 3’s revenue, which also supports schools and health care, continues.
Prop. 42 would bar the state from taxing the value of your ownership stake. It doesn’t change business income taxes, the franchise tax or local property taxes on business property. If your business income flows through to your personal return and is above the Prop. 3 thresholds, those brackets continue to apply.
Families with tens or hundreds of millions were never inside Prop. 40’s threshold, but many watched closely because a future version could be different. If Prop. 42 is certified, a new state wealth tax at any threshold would first need voters to amend the constitution again, which gives plenty of public notice. Estate planning still runs mainly on federal rules, since California has no estate or inheritance tax. It’s a good moment to review trusts and residency documents with your advisers rather than make hurried moves.
California’s free ballot tracking service tells you when your mail ballot was received and counted, and alerts you if there’s a signature problem you need to fix. Counties give voters time to cure signature issues, so check your status and respond quickly if contacted.
None of these measures changes your state income tax rate, sales tax or rent directly. The indirect effects run through the state budget: what gets funded, and how, as federal cuts land. That’s decided in Sacramento between January and June.
Leaving California Because of Taxes? Get These Rules Right
The billionaire tax campaign was full of stories about wealthy residents moving away. If you’re weighing a move yourself, California’s residency rules decide whether you actually stop owing it tax.
Residency is about where you’re domiciled, not just days
California taxes residents on all their income, wherever it’s earned. You’re a resident if you’re in the state for other than a temporary or transitory purpose, or domiciled here and outside only temporarily. The Franchise Tax Board’s Publication 1031 lays out the factors it weighs.
More than nine months creates a presumption
If you spend more than nine months of a tax year in California, you’re presumed to be a resident. You can rebut it, but the burden shifts to you.
The 546-day safe harbor is narrow
If you’re outside California for at least 546 consecutive days under an employment-related contract, you can be treated as a non-resident during that period, subject to conditions such as limited return visits and limits on investment income. It doesn’t cover people who simply retire elsewhere.
Closest connections decide close cases
Where your home is, where your spouse and children live, where you’re registered to vote and licensed to drive, where your doctors, accountants, clubs and bank accounts are: these all count. Keeping a California home while claiming residency elsewhere is the classic audit trigger.
California-source income stays taxable
Even after a clean move, income from California sources, such as rent on property here, a California business, or some deferred compensation and stock option income tied to work done here, can still be taxed by California.
Prop. 40 used a residency date before the measure’s announcement precisely because of departures, and its supporters say they’ll try again. Any future version would likely face Prop. 42’s ban on residency-based retroactive taxes if Prop. 42 is certified. Either way, the Franchise Tax Board’s residency rules apply to every high earner who leaves, so keep records from the day you start planning a move.
What Happens Next
The vote count isn’t the end of this story. Here’s the sequence from here.
The Secretary of State certifies statewide results in December, after counties finish counting and reporting. Until then, expect the margins to shift as late mail ballots are counted; in California those often lean differently from election-day votes. The new governor takes office in January and must propose a budget that deals with federal healthcare cuts, which was the core argument for Prop. 40. SEIU-UHW president Dave Regan said the union plans to return with a measure in 2028 if the Legislature doesn’t act, calling it “our plan.” If Prop. 42 is certified, any such measure would need to amend the constitution to get around its ban.
The campaign also left loose ends that may resurface: allegations reported by CalMatters and the Los Angeles Times against the union’s leadership, which the union called a smear campaign, and a lawsuit by a clinic association involving a separate measure, Prop. 44. Those disputes don’t affect the tax rules described here.
Official Contacts and Where to Check Results
For final, certified results, use the Secretary of State rather than news tallies. For questions about your own California taxes or residency, go to the Franchise Tax Board.
Bing map locator: tax help near you
Questions People Are Still Asking
Is California the first state to vote on a billionaire wealth tax?
Prop. 40 was widely described as the nation’s first statewide tax on billionaires’ assets to reach a ballot. No U.S. state currently taxes individuals on their total net worth.
Could lawmakers have lowered the $1 billion threshold?
Opponents argued the threshold could be lowered later, which CalMatters’ fact check called largely misleading because the threshold was written into the measure. The point is moot if Prop. 40 fails, and Prop. 42 would bar similar taxes regardless of threshold.
Did Prop. 40 tax real estate?
It targeted stocks, bonds, business holdings and other valuable personal property. Real estate in California is taxed separately through local property taxes.
Does Prop. 3 raise my taxes?
Not compared with today. It keeps the current top rates instead of letting them drop after 2030. Compared with what the law would have been in 2031, it means higher taxes for top earners than if it had failed.
Did billionaires leave California because of the measure?
Some did publicly, including Google co-founder Sergey Brin, who announced his move and funded the opposition. How many left, and how much income tax the state loses as a result, is disputed; the LAO put the income tax effect at less than $1 billion a year.
Where did Gov. Newsom stand?
He opposed Prop. 40, tried to keep it off the ballot through negotiations, and endorsed Prop. 42.
Could the result still flip?
Margins shift as California counts late ballots, but an 11- to 13-point deficit with most votes counted is large. Check the Secretary of State’s results page for updates until certification in December.
Would billionaires who moved away in 2026 still have owed it?
Yes, if they were California residents on 1 January 2026. That date was chosen so that moving after the measure was announced wouldn’t avoid the tax. Prop. 42’s ban on retroactive and residency-based taxes was aimed squarely at that design.
What is the state spending limit that Prop. 41 refers to?
Often called the Gann limit, it’s a cap on state appropriations that voters approved in 1979. Prop. 40 was written so its revenue wouldn’t count toward that cap, letting the money flow to healthcare. Prop. 41 would have barred new taxes structured that way.
Did trusts count toward the $1 billion threshold?
The measure applied to certain trusts as well as individuals, so wealth held in qualifying trusts couldn’t simply be moved out of reach. The exact rules would have been set out in the measure’s statutory provisions and later regulations.
Is there a federal wealth tax?
No. Federal proposals for an annual tax on very large fortunes have been introduced in Congress over the years, but none has become law. The federal estate tax applies only at death, and only to large estates.
Why does California take so long to count?
Most Californians vote by mail. Ballots postmarked by election day count if they arrive within seven days, and voters get time to fix signature problems. Counties then verify and report, which is why final results take weeks.
Does Prop. 42 affect local parcel taxes or bonds?
Prop. 42 is aimed at new state taxes on owning personal property such as financial assets and business interests. Local real estate taxes, parcel taxes and school bonds are governed by separate rules and weren’t the target of the measure.
What about the other tax measures on the ballot?
California voters faced five tax-related measures this year. This page covers Props. 3, 40, 41 and 42, which deal with income and wealth taxes.
How this page was checked. Results reflect returns reported by news outlets on 4 November; no measure discussed here had been certified, and Prop. 40 hadn’t been formally called. Measure details come from the Legislative Analyst’s Office, the official voter guide and nonpartisan reporting. Campaign finance totals are as reported. Calculator figures use approximate thresholds and are our own estimates.
This page is independent, nonpartisan general information. It doesn’t take a position on any measure and isn’t tax or legal advice.
Key sources: Legislative Analyst’s Office · California Secretary of State · Franchise Tax Board