The California Confiscation tax, or wealth tax, appears to be headed for defeat. While final results are pending because of mail-in ballots, the current approval gap suggests the tax likely won’t pass.
Proposition 40 was created to punish affluence in California. It would assess a 5% levy on anyone with a net worth over $1 billion. The tax was designed to include unrealized gains on any assets, including private securities.
The tax was concocted by SEIU-United Healthcare Workers West (SEIU-UHW), ostensibly to raise funding for healthcare in a state that is known to lose billions in public funds to fraud — including from state healthcare programs
Because California is home to the world’s most robust innovation ecosystem, the punitive tax would have penalized successful entrepreneurs who may have been wealthy on paper but cash-poor. The tax could have compelled individuals to sell holdings in a company they founded, potentially imperiling control of the firm. Many investors and creators lobbied against it. Even Governor Gavin Newsom opposed the tax, arguing that in the long run it would harm California.
Proponents claimed the tax would raise an additional $100 billion in revenue, but some economists challenged that premise, with a recent report saying it would actually cost California billions in tax revenue as affluent residents fled to more welcoming jurisdictions.
While some Democrats opposed the tax, extreme-left politicians like Senator Bernie Sanders and Congressman Rho Khanna vocally supported it. The California Democrat Party formally endorsed the proposition.
As of today, 55.6% of voters had voted against the proposal with 60% of the votes tallied.
A countermeasure was also on the ballot: Proposition 42 created a rule that would prohibit new state taxes on personal property in general. With 59% of the votes counted, 54.3% of the electorate supported the measure.
