Prop 40 would create a one-time 5% tax on the worldwide net worth of California residents with more than $1 billion in assets, applying to people who were residents on January 1, 2026, the state voter guide says.
The measure, formally titled the One-Time Wealth Tax for State-Funded Healthcare, Education, and Food Assistance, would set the tax rate at 5 percent for most billionaires and allow a phased-in reduced rate for those just over the $1 billion threshold, according to the Legislative Analyst’s Office summary in the official voter guide.
Under the proposal the money would be collected in 2027 and the Franchise Tax Board would administer valuation and collection; the voter guide notes taxpayers could spread payments over five years but would pay more to do so.
Prop 40 requires that 90% of revenue go to a health account and 10% go to education and food assistance, and the Legislative Analyst projects the tax would likely raise “tens of billions” in temporary revenue, though exact amounts are uncertain.
The California Budget & Policy Center says Prop 40 aims to plug shortfalls caused by recent federal cuts to health and nutrition programs and estimates the measure could raise tens of billions in the near term while warning of potential long-term income tax losses if wealthy residents leave the state.
Who would count as a billionaire under Prop 40 and how wealth is valued are central questions. The measure applies to individuals, married couples, or trusts whose net worth exceeds $1 billion and excludes certain items such as many retirement accounts and some real property, the policy center explains.
Valuation rules in the measure treat publicly traded shares differently from hard-to-value assets like private company stakes or art; the measure authorizes certified appraisals and provides formulas and procedures the Franchise Tax Board would use to resolve disputes.
Supporters argue Prop 40 would provide emergency funding to protect Medi-Cal, food assistance, and K–14 education from federal funding cuts. Opponents warn some wealthy Californians might try to sever residency or shift assets to reduce liabilities, which could reduce future income-tax receipts.
The Legislative Analyst’s Office cautions the revenue estimate is uncertain because stock prices change and taxpayers may use avoidance strategies, and it says any long-term reduction in state income tax revenue from migration would likely be less than $1 billion per year.
In practical terms Prop 40 would create a special 2026 Billionaire Tax Reserve Fund, limit how much can be appropriated each fiscal year and exempt the new revenues from certain constitutional spending rules, the voter guide says.
Voters weighing prop 40 should consider both the near-term revenue boost for health services and the legal and economic questions experts say could follow if the tax is approved and challenged in court.
Sources
- California Secretary of State — official voter guide analysis and Legislative Analyst summary on who pays, timing, spending rules, and fiscal effects.
- California Budget & Policy Center — explainer of how the one-time 5% tax would be calculated, revenue estimates, exclusions, and policy trade-offs.
- Eciks — coverage summarizing the measure as a one-time 5% levy on assets over $1 billion and its stated spending priorities.
