California voters reject one-time wealth tax on billionaires

(CNN) — Voters in California have rejected a measure to impose a one-time 5% wealth tax on residents with a net worth of over $1 billion.

Proposition 40 became one of the highest-profile and expensive fights over ballot measures this election cycle. With the backing of billionaire funders, groups opposing the proposition spent tens of millions of dollars in ads against the measure.

The wealth tax would have applied to around 250 billionaires in California, with the funding raised primarily earmarked for healthcare following federal cuts to Medicaid and other programs.

Tech and corporate leaders had threatened to move their residences, and even their businesses, out of California if the measure passed – potentially depriving the state of crucial jobs. The battle over Proposition 40 was one of the most expensive political fights in the country with Google co-founder Sergey Brin funneling just over $100 million to a group trying to defeat the tax.

California’s Democratic Gov. Gavin Newsom had said he would vote against the measure, instead proposing a national tax on billionaires as he eyes a potential 2028 presidential run. Gov.-elect Xavier Becerra, another Democrat, also expressed opposition.

But the measure had the backing of other prominent Democrats, including progressive Sen. Bernie Sanders of Vermont and Rep. Ro Khanna of California, along with several unions.

Proponents have said the measure was a necessary response to federal healthcare spending cuts from Republicans’ One Big Beautiful Bill Act, estimating a shortfall of about $20 billion per year for California moving forward, which threatens the state’s Medi-Cal program that provides healthcare to low-income Californians. They estimated the wealth tax could raise $100 billion, enough to cover the shortfall for about five years.

Meanwhile, opponents of the measure had argued it could harm the state where they built their businesses and fortunes, with Brin — who was born in Moscow — comparing the tax in a rare comment to The New York Times to the society he fled as a child and saying he doesn’t want California to adopt socialism.

Newsom, in making the case for a national tax, had said Prop 40 would not address other state budget needs like housing, childcare or education and disagreed with “a single advocacy organization” writing “the state’s tax code on its own terms.”

Suzanne Jimenez, a sponsor of the measure as part of the group Yes on 40, accused opponents of running a “deeply misleading and corrupt campaign” and criticized the amount of money they poured into it.

“Buying an election is not the same as winning the debate,” Jimenez said in a statement, adding, “The billionaires may have bought themselves a temporary victory at the ballot box, but they have not bought themselves an end to this debate, and this is only round one. This fight to save patient lives and ensure billionaires pay their fair share has only just begun.”