Can California’s Prop 40 Apply to Non-Billionaires?

Some have claimed that Prop. 40 – the so-called “billionaire’s tax” or “wealth tax” – will allow the Legislature to apply the 5% tax to non-billionaires. Is that possible? This is a case of statutory interpretation of a proposal before the electorate of the state of California. As such, we need to review the language of the proposed ballot measure.

Like almost all statewide ballot measures that are statutory initiatives, Prop. 40 allows the Legislature to amend the statutory language with a super-majority vote to further the purposes of the measure. Note that Prop. 40 is both a constitutional initiative (meaning it adds provisions to the state Constitution, Article XIII, Taxation) and a statutory initiative (meaning it adds provisions to the Government Code and the Revenue and Taxation Code).

What is that standard authority for the Legislature to enact changes? It is contained in Prop. 40 in its Section 50310. Legislative Authority. This section provides: “The Legislature may amend the 2026 Billionaire Tax Act, by statute passed in each house of the Legislature by rollcall vote entered in the journal, two-thirds of the membership concurring, if the statute is consistent with and furthers the purposes of the 2026 Billionaire Tax Act.”

This language is tighter than many similar provisions in ballot measures which usually require an amendment to “further the intent” of the measure. Prop. 40 says any legislative amendment must be “consistent with and further the purposes” of the act.

This new, one-time tax is established in the state Constitution, which cannot be changed by the Legislature. It would require an amendment voted on by the electorate at a statewide ballot. Prop. 40 (in its Section 4) adds Section 37 Article XIII of the California Constitution, to read, in part: “This section authorizes and enables a one-time tax on the accumulated wealth of California billionaires, imposed on those individuals who are California residents …”

This language is key because it sets forth in constitutional language that the act provide a “one-time tax” that is imposed upon “California billionaires.”

We next turn to the findings set forth in Prop. 40. Section 2 of the ballot measure contains findings. The relevant ones for this analysis are:

“(r) California has around 200 billionaires who collectively possess an astonishing $2 trillion in wealth. These billionaires pay less than 1.5% of their total wealth in annual taxes, including federal, state, and local taxes, according to leading economic estimates—a small fraction of what ordinary Californians pay.

“(s) There are more than 19 million taxpayers in California who are not billionaires. They include working-class individuals such as nurses, teachers and firefighters, as well as wealthier taxpayers like highly compensated professionals, entrepreneurs, and tech industry workers. All of these Californians pay tax on a much larger portion of their true economic income than the state’s billionaires do. According to economic analysis and including all taxes at all levels of government, billionaires pay 24% of their income in taxes while the average taxpayer pays 30%. This means that the average taxpayer pays a 25% larger share of their economic income, taking into account all state and federal taxes, than the average billionaire. See Akcan Balkir, Emmanuel Saez, Danny Yagan, and Gabriel Zucman, How Much Tax Do US Billionaires Pay? Evidence from Administrative Data, National Bureau of Economic Research Working Paper No. 34170 (2025).

“(t) A wealth tax is not a new concept under California law; narrower and less progressive wealth taxes are already paid by wealthy and low-income Californians alike. These taxes include the annual Vehicle License Fee, a tax based on 0.65% of the value of a vehicle, and the annual property tax on housing of about 1% on the assessed value of a house.

“(u) The immense and growing fortunes of billionaires bring privileges inaccessible to most. Whereas nurses, teachers, firefighters, and tech workers alike pay taxes on nearly all of their earned income, billionaires can shield enormous sums from taxation. Their primary assets—stocks, businesses, real estate—grow in value year after year, but because this growth is taxed only at sale and billionaires often need not sell, they pay no tax on their rising fortunes. Moreover, when these types of assets are passed to heirs, current laws enable billions of dollars in untaxed wealth to be inherited without ever triggering an income tax bill. Many also employ complex financial strategies to relocate wealth “on paper” while, in reality, continuing to benefit from California’s economy and infrastructure.

“(v) Scholars have shown that closing these billionaire loopholes is possible, practical and fair. They demonstrate that carefully crafted policy can preserve entrepreneurial success while safeguarding the state economy and avoiding undue burden on administrators or the broader taxpayer base. See Brian Galle, David Gamage, and Darien Shanske, Money Moves: Taxing the Wealthy at the State Level, 113 California Law Review 635 (2025).

“(w) Since the 1980s, the wealth of billionaires has grown by an average 7% each year, vastly outpacing the growth in wages and savings for ordinary Californians. The collective wealth of California billionaires has surged from $300 billion in 2011 to $700 billion in 2019 to over $2 trillion in 2025. The wealth tax imposed by this Act would only modestly slow this explosive growth, collecting less than the billionaires typically gain in just a single year. California billionaires, even after paying the tax, will continue to amass ever-rising fortunes.

“(x) According to leading economists, billionaire wealth is more concentrated in California than in the United States overall. As a result, the State is uniquely positioned to address both the well-documented crisis of wealth inequality in the United States and the emerging and interrelated crises the state faces with respect to health care, education and hunger-relief programs.

“(y) Billionaires have built their extraordinary fortunes with the help of California resources and were the largest beneficiaries of the federal legislation that contributed to the current state budget crisis. It therefore is both necessary and equitable to ask those who have benefitted most from California’s resources to contribute proportionately to support health care, education, and nutrition in California through a one-time 5% tax on billionaire wealth.”

All of the relevant findings reference a one-time tax applicable to billionaires.

In addition, Prop. 40 contains a purpose and intent section. Section 3 of the ballot measure provides in relevant part:

“(a) The purpose of the 2026 Billionaire Tax Act, referred to herein as the “Act,” is to protect access to high quality, equitable health care, and to support funding for kindergarten through grade fourteen public education and food assistance programs, by raising revenue from a one-time tax on billionaire wealth.

“(b) Revenues from the Act are intended to respond to urgent, existing health care, education, and nutrition needs that are being worsened by reductions in federal and state funding and by broader fiscal uncertainty facing the state.

“(c) By designating billionaire wealth the source of this critical revenue, the Act confronts the fundamental unfairness that arises because a large percentage of billionaire wealth is never taxed by the State due to billionaires’ unique ability to control the timing, location, and amount of income tax that they pay.

“(d) The Act raises funding for health care, education, and food assistance by imposing a narrowly applicable, one-time tax that is administratively feasible and efficient to enforce against all billionaires in the State.

“(e) The Act is intended to treat similarly situated taxpayers and assets similarly, except to the extent that sound tax policy requires otherwise.”

All of the relevant provisions of the purpose and intent section reference a one-time tax applicable to billionaires.

Turning to the statutory provisions of Prop. 40, Section 7 of the ballot measure provides: “Part 27 (commencing with Section 50300) is added to Division 2 of the Revenue and Taxation Code, to read: PART 27. 2026 BILLIONAIRE TAX ACT CHAPTER 1. IMPOSITION OF TAX ON PERSONAL WEALTH IN EXCESS OF $1 BILLION IN NET WORTH 50300. This part shall be known, and may be cited, as the 2026 Billionaire Tax Act. 50301. (a) An excise tax is imposed for tax year 2026 on the activity of sustaining excessive accumulations of wealth by applicable individuals with net worth of one billion dollars ($1,000,000,000) or more, and on applicable trusts…”

With these provisions in Prop. 40 both in the state Constitution and in Code, would expanding the tax to include non-billionaires be “consistent with and further[] the purposes of the 2026 Billionaire Tax Act”? That would seem unlikely considering allowing more than a one-time assessment beyond billionaires would be inconsistent with the act’s explicit terms.