California voters reject new tax on billionaires in a blow to the left

California voters have rejected a ballot measure that sought to impose a one-time tax on the state’s billionaires, NBC News projects, dealing a blow to progressives who championed the proposal.

Proposition 40 sharply divided Democrats in the state and nationally as the party figures out what direction it wants to take heading into an open presidential contest. It also faced a barrage of ad spending funded by the billionaires it would have affected, particularly in Silicon Valley.

The ballot initiative proposed a 5% tax on the assets of state residents who have net worths of more than $1.1 billion, with the option for a smaller, phased-in tax for those worth between $1 billion and $1.1 billion. It would require California to spend 90% of the created revenue on healthcare. The taxes would apply retroactively to anyone living in the state as of Jan. 1, 2026.

Proposition 40 would have been the first enactment of a billionaire tax in the U.S. But many progressives who support increasing taxes on the wealthy in general came out against it because it was a one-time tax, rather than a permanent one, and it primarily benefited one policy area, healthcare.

Critics in both parties argued that the tax would prompt wealthy Californians to flee the state in droves, which would dry up broader tax revenue streams and create more budget problems.

Democratic opponents included outgoing Gov. Gavin Newsom, a possible 2028 presidential contender, and gubernatorial candidate Xavier Becerra. Many of California’s largest unions and Democratic-aligned advocacy groups also opposed the measure.

Meanwhile, Sen. Bernie Sanders, I-Vt., and Rep. Ro Khanna, D-Calif., another potential White House hopeful, were among its notable backers, holding several rallies in the state ahead of Election Day.

Opponents of Proposition 40 held a staggering upper hand on the airwaves. In late October, they were outspending supporters 250 to 1 on ads, according to the ad-tracking firm AdImpact.

The biggest spender, “No on Prop. 40,” was a coalition that included the California Teachers Association, the California Medical Association and Planned Parenthood and received contributions from several billionaires. Other groups got millions from Google co-founder Sergey Brin and the California Business Roundtable.

Opponents of the billionaire tax also placed two dueling initiatives on California’s ballot — Proposition 41 and Proposition 42 — that would have effectively nullified Proposition 40.

Proposition 41 sought to require the state auditor to review new special tax measures and that any new tax be counted toward a voter-approved state spending limit. Proposition 42 proposed banning any new taxes on assets, including investment accounts and property and restricting increases in retroactive taxes. Both would have gone into effect by earning just one vote more than Proposition 40, even if it passed.