Prop 40: A one-time, 5% tax on Californian billionaires’ total net worth, which would bring in tens of billions of dollars for Medi-Cal. It would be applied retroactively to the first of January 2026, making it very difficult to flee. Props 41 and 42 both have core mechanisms which would entirely nullify its effects.
Prop 41: Invalidates any future taxes that are exempt from California’s legal spending limit, which prevents it from spending more than it did last year, adjusted for inflation. Prop 40 would be one such tax, as it would cause the state to bring in many billions of dollars that were previously unearned.
Prop 42: Disallows the state legislature from introducing taxes upon personally owned property, and new taxes that apply retroactively. Since Prop 40 backdates wealth calculation to January 1, 2026, it would be neutralized should Prop 42 pass.
California’s state healthcare assistance program, Medi-Cal, suffered heavy funding cuts due to recent widespread federal budget slashing in the field. These changes bring with them impending fiscal catastrophe for the state government, which is already in a deficit and in debt. Thus, Prop 40, or the Billionaire Tax Act, was brought to the table, as a stopgap measure to address the funding disparity and prevent immediate disaster. It isn’t a perfect bill, with potential side effects largely unknown, but no other viable solution has been found. There is no better immediate way for California to address the issue, and it will bring enough funding in to keep things moving until a more sustainable path forward is brought forward.
However, those who would be taxed by Prop 40, the billionaires, are fighting tooth and nail to stop it from being passed. A Political Action Committee known as Building a Better California (BABC) has shelled out over $150 million to fight the bill by promoting Prop 41 and Prop 42 while simultaneously vilifying Prop 40 through statewide advertisement. BABC was co-founded by former top Google executives Sergey Brin and Eric Shmidt. Various other successful entrepreneurs find themselves on the donor list such as Peter Thiel, cryptocurrency investor Chris Larsen and venture capitalist John Doerr, among nearly 20 others. Prop 40 could cost Brin tens of billions of dollars, and posea substantial hit to the net worth of billionaires in California. The tax could weaken billionaires’ control over companies they own stakes in because they’d have to sell their positions to raise liquidity. Their efforts have coalesced around two main counter-propositions which will be on the ballot at the same time, Props 41 and 42. Each of these propositions could essentially nullify the effects of the Billionaire Tax Act by changing state regulations to make its enactment illegal.
Critics of the proposition argue that it will lead to the flight of billionaires from the state. However, this is largely overblown. As a retroactive tax, even those who leave the state before its implementation would still be on the hook for their share of their wealth. And while it may lead to small losses in income tax from leavers, in most cases they paid negligible taxes anyway.
Prop 40 also closes a loophole in tax code that allows the wealthy, to skirt income tax. Taking out loans with stock as collateral enables people to report their yearly income as zero, or even as a net loss, a strategy that allows wealth to grow by enormous sums with little or no effect from income taxes. Prop 40 addresses this by being a direct tax on total net worth, a never-before-seen state-level law. This change in methodology is a huge reason why it has Californian billionaires so riled up.
Prop 40’s passage or failure will have a huge impact on Inland Empire (IE) healthcare outcomes. Four in ten of the region’s residents rely on Medi-Cal for their health insurance,and Aa eight percent, the IE is above the statewide average for uninsured people. A minimum of 300,000 people would also become uninsured without Prop 40, and about 150,000 of those would be due to undocumented residents no longer being eligible for Medi-Cal. Additionally, more than anywhere else in the state, the IE is reliant on small, community-run healthcare facilities to treat its people. Without California subsidizing them through Medi-Cal, many of these small to medium businesses would likely be forced to shut down.
Without the Billionaire Tax Act, California and the Inland Empire would see untold numbers of people lose their health care while those who are able to remain would see a decline in quality of care. Those in opposition have more wealth than could possibly be spent, yet continue to use it to evade state taxes. Props 41 and 42 are blatant attempts to proliferate inequality in the state and protect the few. Show the billionaires that we, the people, are able to fight back, and support the Billionaire Tax Act.
