Although a controversial proposed tax on billionaires appears headed for defeat in California, the idea of taxing great concentrations of personal wealth remains alive and well among Democrats following their resounding victory in nationwide voting this week.
California’s Proposition 40 would impose a 5% tax on the wealth of billionaires who resided in the state at the beginning of 2026, with the revenues to be used for healthcare programs, food assistance and education. The results are not yet final, but with 60% of the ballots counted, the measure has received only 45% approval and is not expected to pass, according to the Associated Press.
The proposed wealth tax was bitterly opposed by a handful of wealthy Californians, led by Google co-founder Sergey Brin, who contributed $100 million to Building a Better California, a $300 million effort that aimed to defeat the legislation.
Garry Tan, an influential figure in tech who runs the startup accelerator Y Combinator, celebrated the expected demise of the tax proposal. “We dodged a bullet on this asset seizure tax,” he wrote on X on Wednesday. “Builders of tech in California had a good day yesterday: we want abundance and asset seizure is the one guaranteed way to kill the golden goose. Huge thanks to Sergey Brin here.”
Dems press on: While the expected defeat of Proposition 40 in California is a setback for proponents of a wealth tax, newly elected Democrats in Congress are still expressing interest in the idea. As Politico’s Brian Faler put it Thursday, “Rich people are back on the menu in Washington.”
As part of their affordability agenda, progressives have floated various tax proposals aimed at the rich. Rep. Ro Khanna and Sen. Bernie Sanders have released a proposal called the “Make Billionaires Pay Their Fair Share Act,” which would impose a 5% tax on those with net worth over $1 billion. Unlike the proposal for a one-time tax in California, the federal tax would apply each year.
Sen. Chris Van Hollen released a proposal last year aimed at the high incomes of the very wealthy. It would impose a graduated surtax on incomes over $1 million, starting at 5% and rising to 12% for those who earn more than $5 million a year. The top income rate would rise sharply to 49%, up from the current 37%. And the top tax rate for capital gains would rise from 23.8% to 35.8%. At the same time, lower-income households would receive tax cuts through new exemptions.
Van Hollen told Politico that despite the apparent defeat of the wealth tax in California, there seems to be “growing support” for such a measure. “People are recognizing that we have a tax system that allows individuals to accumulate huge amounts of wealth,” he said.
Still, while Democrats may be moving toward higher taxes on wealth, they face a serious uphill battle against a White House controlled by a tax-cut-loving Republican, as well as a Senate in which they lack the ability to defeat a filibuster — not to mention more tax-averse moderates in their own party.
“It is clear Democrats will try to lower taxes for middle-income households and raise taxes on certain businesses and high-income households,” Howard Gleckman, nonresident fellow at the Tax Policy Center, told CNBC. “But it is much too soon to know how.”
Tax policy experts say that significant changes may have to wait until Trump leaves office.
“Democrats will have limited maneuvering room in 2027 given Republican control of the White House, but proposals made in 2027 will shape the direction of policy in the future,” the Tax Foundation’s Andrew Lautz and Garrett Watson wrote in a report published Wednesday. “Democrats in Congress will place a high priority on proposals to raise tax revenue from corporations and very high earners. While their ambitions to raise taxes will be limited by President Trump’s veto, these proposals will serve as messaging and discussion vehicles over the next two years on the direction of the tax code.”