Ultrasound technologist Mayra Castaneda speaks to healthcare workers holding signs in support of the billionaire tax during a press briefing in Los Angeles on April 27, 2026. Healthcare workers and their allies outlined the next steps in their efforts to get California’s billionaire tax on the ballot for the November election, with their efforts already surpassing 1,500,000 signatures collected statewide. The initiative would levy a one-time 5% tax on California billionaires. (Photo by Frédéric J. BROWN / AFP via Getty Images)
FREDERIC J. BROWN/AFP via Getty Images/AFP
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FREDERIC J. BROWN/AFP via Getty Images/AFP
late Monday, The associated press determined that California voters rejected Prop 40, the proposed billionaire wealth tax I wrote about last week. Given the big blue wave we saw in the midterms, why did this tax on billionaires fail to surf to victory?
To make sense of the results, I went back to the two economists I spoke with last week: Gabriel Zucman of UC Berkeley, a prominent advocate of the wealth tax, and Joshua Rauh of Stanford, a prominent critic of Prop 40.
Last week, they disagreed on the consequences of this billionaire wealth tax on California’s economy and tax revenues. Now comes the sequel, in which they disagree on what the results say about wealth tax policy.
Their debate could foreshadow a more important one during the next Democratic presidential primary: should the party adopt a wealth tax?
Has billionaires’ money tipped the scales?
Zucman attributes Prop 40’s failure to the corrosive influence of money.
“I’m not surprised,” Zucman says. Prop 40 opponents spent almost 400 million dollars fight it, including spending on competing ballot measures, making it one of the costliest ballot initiative fights in history.
“The money spent by billionaires was crucial,” Zucman says. “Everyone who lives in California has been bombarded by a deluge of ads. It’s easy to see how crucial this could be in such a close election.”
But haven’t the Democrats won many elections this cycle despite the enormous amounts of money spent against them? In Texas, for example, Elon Musk single-handedly paid more than 150 million dollars to defeat Democrat James Talarico. And Talarico ended up winning his Senate race in a comfortable margin. Why would money have been so decisive with Prop 40 and not in other races across the country?
For one thing, Zucman says, the spending gap was much larger in the fight for Prop 40. “Billionaires spent over $300 million on advertising compared to negligible amounts on the other side,” Zucman says. “On television and in their mailboxes, voters were exposed only to anti-tax arguments. This was very different from other midterm elections: In those elections, when spending was high (e.g., Talarico vs. Paxton in Texas), it was high on both sides, although unequally. The net difference in spending was considerably greater for Prop 40.”
It’s also possible that money matters more in ballot initiatives than in races between candidates. The analysts have complained For decades, California’s ballot initiative system has been too easily manipulated by special interest groups. The finer details of specific policies can get complicated, and many voters don’t take the time to learn about them. This can give well-funded ad campaigns more power to shape their opinions.
Meanwhile, in candidate races, voters can at least rely on name recognition or party labels, which give them an easy mental shortcut — what social scientists call a “heuristic” — for making decisions at the ballot box. Even if they know little about the candidates, they generally know which party they prefer.
But Proposition 40 was not accompanied by the same clear partisan signal. In fact, prominent Democrats, including California Governor Gavin Newsom, have spoken out against the proposal. Newsom said he favors a national minimum tax on billionaires.
Or was it tax policy itself that was the problem?
“Popular opinion on the wealth tax is clearly not as strong as its supporters thought,” Rauh says.
Rauh questions whether money and advertising can really explain Prop 40’s poor showing. He compared support for the tax with support for Kamala Harris in the 2024 presidential election. In some of the “more progressive counties in the Bay Area,” he said, Harris won overwhelming support while Prop 40 gained far less. This gap between support for Harris and support for Prop 40 was larger there than in other Democratic-leaning counties in the state.
If advertising was the main explanation for the tax’s poor results, he explains, why was the gap so much greater in the Bay Area? Sure, he says, advertisers may have done more targeting there, but he thinks the uneven trend across the state casts doubt on the idea that advertising was the deciding factor.
“(T)he counties with the largest defections are actually those whose residents are most likely to know a billionaire, work for a billionaire or have seen one move to Texas or Florida,” Rauh said. written in a recent article. “Simply put, proximity to taxpayers and the businesses they finance encouraged voters to more skeptical of the tax compared to their core policies.
For Rauh, this skepticism leads to a broader conclusion: “The electorate, even in progressive California, has shown that they are not ready for a wealth tax,” he says.
More moderate Democratic voters, especially in wealthy areas like the Bay Area, might simply not like this new way of taxing the wealthy in America and the consequences it could have. After all, this policy idea has divided Democrats before. During the 2020 presidential primary, Elizabeth Warren and Bernie Sanders both championed the wealth tax, but rivals like Senator Cory Booker And Michael Bloomberg opposed it. Joe Biden said he did not oppose a wealth tax on the campaign trail, but at the start of his presidency he refused to pursue Senator Warren’s wealth tax proposal.
Or maybe voters weren’t rejecting the idea of a wealth tax per se. Maybe they were rejecting the details of This wealth tax.
On the one hand, Prop 40 was a one-time tax, and it affected its projected revenues in a way that drew opposition from traditional Democratic allies. It allocated 90% of revenues to health care, leaving only 10% for food aid and education-related programs.
This has contributed to placing some typically left-wing organizations in the opposition camp. For example, the California Teachers Association, a powerful teachers union. He argued that Prop 40 harmed public schools and “failed to provide the sustainable, long-term funding our schools and communities deserve.”
Meanwhile, Proposition 40 would have taxed billionaires at the state level. Proponents of a national approach argue that a wealth tax would be more effective nationally because it is harder to leave America than to move to another state.
When Newsom spoke out against Prop 40 in June, he wrote“Wealth is mobile and it buys the state with the lowest taxes. The fight belongs at the federal level, where this broken system was created in the first place.”
Where is the wealth tax movement headed from here?
Despite Proposition 40’s defeat, Zucman believes the wealth tax movement is far from over.
“With the blue wave nationwide, the billionaire tax will be at the forefront of the new Congress,” Zucman said. “Many newly elected Democratic senators have campaigned on curbing the power and influence of billionaires. Significant progress can reasonably be expected over the next two years.”
Rauh also expects to see more wealth tax proposals in the next Congress. But with President Trump in the White House, he sees little chance of this becoming law in the near future.
“It will be the 2028 election that really demonstrates how much the public wants a wealth tax, as these proposals will likely loom large in the political debate,” Rauh said.
But even if wealth tax proponents win over voters, Rauh points out they’ll face another major obstacle: the courts. He argues that a federal wealth tax would constitute “a direct tax,” a type of tax subject to crippling constitutional restrictions.
As I explained in this 2019 Planet Money newsletterThe U.S. Constitution requires that “direct taxes” go through a complicated process to be constitutional. Specifically, the share of total direct tax revenue collected from each state must correspond to its share of the national population. This could mean very different tax rates depending on where people live.
The history of this strange rule is intertwined with that of slavery. In a first case before the Supreme Courtone judge described it as basically a concession to Southern states seeking to limit federal taxation of their lands and slaves.
The 16th Amendment exempted income taxes from this requirement. But this amendment does not mention the wealth tax.
Legal scholars disagree on whether this rule would doom a federal wealth tax. Is a wealth tax even a “direct tax”? That first Supreme Court case involved a horse-drawn carriage tax that George Washington signed into law in 1794. The Court upheld it, a precedent that wealth tax supporters point to today. To hear more about this story, listen to it Planet Money episode I did, “Transport tax“.
Stay tuned for more wealth tax coverage in the Planet Money newsletter in the future. We believe that this movement is not going to disappear.
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