Decision Called On Fate Of CA's Billionaire Tax Prop. 40, AP Reports

SACRAMENTO, CA — Proposition 40, the ballot measure to impose a one-time state tax of up to 5% on residents with assets over $1 billion, excluding certain holdings, has failed, the Associated Press reported Monday evening, nearly a week after the election.

As of 5:14 p.m. Monday, the measure had received 5,789,026 no votes and 5,159,356 yes votes, according to unofficial vote totals from the California Secretary of State.

The fight over California's Prop. 40, dubbed the billionaire tax, garnered massive attention and significant campaign dollars from both supporters and opponents.

The added tax revenues generated from the labor union–sponsored initiative would have been designated to help fund health care, food assistance, and education programs across the state.

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Even if Prop. 40 received a majority of votes, its implementation would have remained uncertain. Building a Better California, a PAC formed earlier this year to oppose Prop. 40, backed two counter-initiatives — Propositions 41 and 42 — that contain "conflict clauses" designed to void Prop. 40.

Neither counter-measure is explicitly labeled as an anti-billionaire tax initiative:

• Proposition 41 prohibits new state taxes that exclude revenues from the state spending limit approved by voters in 1979, and requires audits for new special taxes.
• Proposition 42 prohibits new state taxes on personal property, including business interests, intellectual property, and financial assets such as retirement or investment accounts.

Both Prop. 41 and Prop. 42, however, contain provision clauses stating that conflicting voter-approved measures on the same ballot become void if Prop. 41 or Prop. 42 receives a higher vote total. Unless Prop. 40 passes with more votes than 41 or 42, it is doomed.

Google co-founder Sergey Brin has contributed millions of dollars to Building a Better California. The PAC is driven primarily by tech-sector figures and high-net-worth donors.

Political alignment on the measure remains split. According to a recent UC Berkeley poll, 80 percent of California Republicans oppose Prop. 40, while 70 percent of registered Democrats support it.

There is division among Democratic leaders. Gov. Gavin Newsom and Democratic gubernatorial candidate Xavier Becerra oppose the billionaire tax, arguing it could push California's wealthiest residents out of state and ultimately hurt revenues. Nine Democratic state lawmakers announced their opposition to Prop. 40 in an open letter to voters, writing that "while well-intentioned, this measure will blow a massive hole in our state budget in the years ahead and undermine our ability to sustain investments in the very priorities Prop 40 claims to support."

Conversely, the California Democratic Party endorsed Prop. 40, arguing that added state revenue is critical to backfill the Trump Administration's federal funding cuts to health care and food assistance programs.

If Prop. 40 passes, California could collect tens of billions of dollars from the wealth tax, though the long-term fiscal outlook remains far less certain, according to the state's Legislative Analyst's Office. If Prop. 42 passes, it would restrict future state options to raise taxes and could reduce overall revenue. The net fiscal impact of Prop. 41 remains unknown, the Legislative Analyst's Office found.

This is a developing story. Check back for updates.