Prop 40 Billionaire Tax Trails in Early California Vote

What happened

California's proposed billionaire tax, Proposition 40, was running well below a majority in early returns Tuesday night, putting in doubt what would be the first state-level tax of its kind in the country. The race had not been called.

KQED reported that a rival measure, Proposition 42, was leading, while Proposition 41 trailed in a tight contest. Both rival measures were drafted to supersede Prop 40 if they collect more yes votes.

Why it matters

Prop 40 would impose a one-time 5% tax on the net worth of California residents worth $1 billion or more, excluding real estate and certain retirement assets. Backers pitched the money as a way to fund the state's health care system.

A win would make California the first state to tax billionaire wealth this way and would be watched closely by lawmakers elsewhere. A loss would be a major setback for the labor-led campaign behind it.

Evidence and context

The tax would take effect retroactively to Jan. 1, a design meant to limit billionaires' ability to avoid it by leaving the state. Prop 41 would bar new taxes enacted after that date, and Prop 42 would ban both wealth taxes and retroactive taxes.

The opposition campaign, led by the group Building a Better California, had raised more than $250 million as of Oct. 28. An October poll from the Public Policy Institute of California found support for Prop 40 had fallen from a majority in September, while the competing measures were polling ahead.

The people and places involved

The measure was put on the ballot by SEIU-United Healthcare Workers West, and California Democrats endorsed it in August. Nvidia CEO Jensen Huang is among the billionaires who have said they support it. Progressive backers also cited an analysis showing California billionaires' collective wealth rose roughly 25%, or $432 billion, in under two years.

The open questions

Early returns can shift as mail and late ballots are counted, so the final outcome of all three measures remains unsettled. If Prop 41 or Prop 42 passes with more yes votes than Prop 40, the billionaire tax could be invalidated even if it also wins a majority.

What comes next

Election officials will keep counting ballots over the coming days, and the three measures are expected to be called as the tally firms up. Any court challenges would follow certification of the results.