California voters rejected a measure that would have taxed the wealth of the state’s billionaires, a provision that some on the Left saw as a trial balloon for a nationwide wealth tax.
Proposition 40 failed with 53.8% voting against it and just 47.2% in favor as of Monday evening, according to the Associated Press, which called the election at 9:38 p.m. with 83% of the vote counted. If the ballot measure had passed, it would have been the first major tax on general wealth, as opposed to income, in modern U.S. history.
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The ballot initiative would have imposed a one-time tax equal to 5% of the accumulated wealth of affected taxpayers. The levy would have applied to taxpayers with taxable assets, including stocks, homes, artwork, and more, worth more than $1 billion.
If the wealth tax passed, its revenue would have funded Medi-Cal, California’s Medicaid program, and similar healthcare programs for low-income Californians.
Backers of the legislation saw Proposition 40 as a blueprint for wealth taxes in other states and at the federal level. Socialists have long pushed for wealth taxes on billionaires and had hoped this California referendum would boost the broader movement.
Six Nobel Prize-winning economists wrote an open letter arguing that the move could “kickstart” a movement for higher taxes on the wealthy across the United States. The economists, Daron Acemoglu, Abhijit Banerjee, Peter Diamond, Esther Duflo, Paul Krugman, and Joseph Stiglitz, have all supported taxing the wealthy more.
“California is the right place to take this historic step,” the group wrote in the letter of support.
Likewise, Sen. Bernie Sanders (I-VT) has called Proposition 40 “a model that should be emulated throughout the country.”
Service Employees International Union-United Healthcare Workers West was the initiative’s top supporter.
The failure comes after debate over the cost and implications of the one-time tax for the Golden State.
Proponents argued that it could raise the Golden State some $100 billion in revenue. The ballot measure’s sponsors, SEIU United Healthcare Workers West, said the money would be used to shield the state’s healthcare system from projected federal funding cuts.
But an analysis, written by Stanford University economists Benjamin Jaros and Joshua Rauh and circulated as a working paper by the National Bureau of Economic Research, found the revenue estimates were being grossly oversold.
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The analysis also found that California’s treasury could have taken an overall hit if the wealth tax led billionaires to flee the state, thereby depriving it of years of their income tax payments.
California Gov. Gavin Newsom, a potential 2028 Democratic contender, came out against the measure. Newsom argued that such a law would cause billionaires to move to other states, which would hurt the economy and tax base.
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[ H/T Washington Examiner ]
