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The California billionaire tax could face a stiff challenge from a competing ballot measure that would ban state taxes on retirement accounts, according to tax experts.
California voters will decide the fate today of Proposition 40, known as the Billionaire Tax Act, which would impose a one-time tax of 5% on the total net worth of Californians worth over $1 billion. The so-called "billionaire tax" is one of the most widely watched ballot measures this election season, since it would be the first state tax on net worth and taps popular anger over the rising power and wealth of tech billionaires.
The tax requires a simple majority to pass. Since it would only tax the state's roughly 250 billionaires, many political experts initially predicted easy passage. Yet a recent poll by the Public Policy Institute of California shows it falling short, with 46% supporting and 52% against.
Supporters of the tax blame a $300 million ad blitz funded by tech billionaires and business groups opposing the measure. Many of the ads claim the ballot measure would allow the Legislature, with a two-thirds vote, to expand the tax to everyday Californians.
Yet tax experts cite another potential roadblock to the tax: Proposition 42. One of two ballot measures that would act as poison pills against the billionaire tax if they get more votes, Prop 42 calls for a permanent ban on any statewide tax on property of all Californians.
The ballot measure "Prohibits any new state tax (1) imposed on the ownership of personal property (all things people own other than real estate), or (2) that applies retroactively based on taxpayer's past activities."
The official California Voter Information Guide explains the "pro" argument by saying that Prop 42 protects Californians from double taxation by "prohibiting new and retroactive taxes on personal property, including retirement and savings."
The "con" argument, according to the voter guide, is that Prop 42 is "just another billionaire-funded trick." Propositions 41 and 42 were created and submitted by Building a Better California, a political action committee funded by tech executives and several California billionaires opposed to the billionaire tax.
Political and tax experts say voters' fears about protecting retirement accounts will be a powerful motivation to vote "yes" on Prop 42, thus nullifying the billionaire tax. As much as they may want to tax billionaires, their retirement accounts may be more important.
"Both Proposition 41, which prohibits new taxes from disregarding voter-approved spending limits, and Proposition 42, which prohibits new taxes on retirement accounts and personal property, could win majority support," said Jared Walczak of Walczak Policy Consulting.
