The fight began with a promise to turn concentrated wealth into a fiscal backstop. In June, SEIU-United Healthcare Workers West qualified Proposition 40 for the ballot with 874,641 signatures. The measure would impose a one-time 5% tax on Californians worth more than $1 billion, with most proceeds aimed at offsetting healthcare cuts and preserving Medi-Cal; it would also apply retroactively to people living in the state on Jan. 1, 2026.¹

Supporters argued that the tax was a necessary response to federal retrenchment and widening inequality. But the proposal quickly exposed a deep split in California’s dominant party. The state Democratic Party and labor allies backed it, while Gov. Gavin Newsom, gubernatorial contender Xavier Becerra, major unions and groups including Planned Parenthood of California opposed it. Critics warned that taxing wealth would drive entrepreneurs and companies out of the state.¹

By the fall, the imbalance was stark. Opponents raised roughly $389 million—against about $33 million for supporters—and placed two countermeasures on the ballot. Proposition 42, backed by the same anti-tax network, would bar new state taxes on personal property and retroactive levies, threatening to block the wealth tax even if voters approved Prop. 40.²

On election night, Prop. 40 trailed 57% to 43%, while Prop. 42 led. Support came mainly from a small cluster of left-leaning counties, including San Francisco, Alameda and Santa Cruz; even tech-heavy Santa Clara and San Mateo were rejecting the tax. Analysts said outstanding ballots offered little obvious path to a turnaround.³

Money mattered, but advocates say the defeat was not merely bought. Igor Volsky of the pro-40 campaign said, “winning requires coalitions,” adding that “there just wasn’t a large coalition” behind the initiative.⁴ Robert Dempsey of Our Revolution offered a blunter diagnosis: amid affordability fears, opponents made another-tax anxiety stick. The result is poised to be a double win for wealthy Californians: defeat of the 5% levy and passage of a constitutional barrier to future wealth taxes.²