A billionaire tax that U.S. Senator Bernie Sanders and other progressives championed as an antidote to economic inequality and a potential model for the rest of the country was defeated in California, U.S. media projected on Monday.
Proponents had estimated Prop 40 would raise $100 billion in revenue, most of which would have been earmarked for healthcare programs to offset federal funding cuts designed to pay for tax breaks enacted last year under President Donald Trump's "One Big Beautiful Bill." Those tax breaks, largely benefiting wealthy individuals and corporate interests, passed with Republican-only support in the U.S. Senate.
The failure of the billionaire tax marks a blow to the left wing of the Democratic Party, even as Democrats won decisive majorities in both houses of Congress in a sweeping midterm election rebuke of Trump and his policies.
Supporters of Prop 40, which targeted stocks, bonds and business assets rather than earned income, reasoned it stood a healthy chance of enactment in a state where voter rolls favor Democrats over Republicans by a nearly two-to-one margin.
But California Governor Gavin Newsom, a likely candidate for the Democratic Party presidential nomination in 2028, came out against the measure, arguing that Prop 40 would backfire in the long run by creating an unwelcome climate for upwardly mobile high-tech entrepreneurs.
His opposition and division among party leaders led initial support for the measure to wane ahead of the vote.
Opponents argued the tax would prompt the ultrawealthy to leave the state, taking their income-tax payments and job-producing enterprises with them, and discourage entrepreneurs from building their startups in California in the first place.
Labor unions were also divided. Billionaires chipped in more than a quarter of a billion dollars that helped fund ads that framed the measure as a gateway to more aggressive taxation for all Californians and as a threat to their retirement accounts.
Those arguments may have resonated at a time when the pinch of higher gas prices and affordability concerns have put a broad swathe of the country in a sour economic mood.
Google co-founder Sergey Brin and at least 11 other billionaires contributed a collective $269 million to a political action committee called Building a Better California, which in turn poured more than $300 million into campaigns opposing Prop 40.
Incoming Senate Finance Committee Chairman Ron Wyden has signaled, however, that taxing the ultrawealthy remains a central goal for the Democratic Party as a whole. "The committee will redouble its efforts to ensure billionaires pay their fair share and hold tax cheats accountable," he said in a November 4 statement outlining the panel's priorities.
