Gov. Gavin Newsom came out against a tax on California's billionaires last year. On Friday he went a step further and endorsed Prop. 42, a measure that would write a ban on wealth taxes into the state constitution. Both questions go to voters on Nov. 3. Paul Kiernan reported it in Monday's Journal. The opinion pages followed on Wednesday and Friday. Here's what each measure does, and who stands where.
Prop. 40 is the tax. It would charge 5% on the net worth of California residents with $1 billion or more in assets. The SEIU-United Healthcare Workers West union proposed it to offset federal Medicaid cuts. The union calls it a one-time tax and says it would raise $100 billion. The state Democratic Party endorsed it in August. The measure counts nearly all assets worldwide, including art, trusts, business stakes and even a dependent's holdings. It also counts voting control, so a founder with 10% of the shares and 50% of the votes is taxed as if he owned 50%. Residency is measured as of Jan. 1, 2026 and net worth as of Dec. 31, 2026. Owners of hard-to-sell assets could pay over five years at 7.5% interest.
Prop. 42 is the counter. It would amend the state constitution to bar new taxes on financial assets or personal property other than real estate. “Californians deserve to have their retirement and life savings protected from new state taxes,” Newsom said. The campaign has raised tens of millions, partly from billionaires including Google co-founder Sergey Brin. The Democratic Party and several large unions oppose it. If both measures pass, the Journal reports, a legal fight is likely.
Why the teachers union said no
The opposition to Prop. 40 isn't only billionaires. The California Teachers Association is against it, Wednesday's editorial notes. The union objects that 90% of the money would go to healthcare, skipping the state rule that sends roughly half of tax revenue to schools. The editorial also cites Jared Walczak's estimate that departing residents have already taken $777 billion in wealth out of the state. The sponsoring union answers that the money is for healthcare for children and families, and says Newsom is siding with the state's wealthiest residents. Friday's columnist, Joseph Sternberg, adds the French example. France's wealth tax raised less than predicted, and President Macron scrapped it in 2018. He writes that Prop. 40 was drafted to close the two gaps its backers blame for France's failure, business stakes and people who moved away. Polls show it narrowly ahead.
Our read
This is Tax and Estate, and we're not telling anyone how to vote. For nearly every reader, the number that matters isn't the 5%. It's the design. Two features are worth understanding whatever happens on Nov. 3. One is the voting-control rule, which values a business stake by the votes it carries, not just the shares. The other is the residency test, with a look at whether a move was made to avoid the tax. Prop. 42 cuts the other way, barring any new state tax on financial assets, not just this one.
The piece of your own plan this touches is the ownership page of your estate file, if you own a business. Go look at how your shares are set up this week. Who holds the votes, who holds the value, and what state your paperwork says you live in. California teachers should know the CTA opposes the tax, partly because the money would go to healthcare, not schools. The storm here is for billionaires. The umbrella is knowing what your own ownership looks like on paper, and you check that on a dry day.