As one of the state’s most closely watched propositions, Prop. 40 puts forward the possible implementation of a “billionaire tax,” but what does this actually mean? Here’s everything students voting in the Nov. 3 midterms need to know.
Proposition 40 would impose a one-time 5% tax on the wealth of roughly 200 Californians worth more than $1 billion. The proposition has significant support, with endorsements from the California Democratic party, California Nurses Association and AFL-CIO California Federation of Labor Unions, the largest labor union in the state.
Supporters say the tax could provide billions of dollars for health care at a time when Medi-Cal faces funding pressures. Opponents argue that taxing wealth could encourage some wealthy Californians to leave the state, potentially reducing future income-tax revenue.
The Proposition
Angeline Vuong, Director for USF Votes and the Associate Director of Community Engagement and Public Service Programs at the McCarthy Center, said students are talking about the proposition, but their understanding varies.
Vuong describes, the proposition does not fit neatly into traditional partisan categories, making it particularly important for voters to research the measure beyond the “tax billionaires” slogan. There’s simply more to it.
At its simplest, the tax would apply to Californians whose net worth exceeded $1 billion at the beginning of 2026. The measure would allow taxpayers to pay the tax over five years.
The funds would be primarily allocated toward health care, which would receive 90% of the revenue. The remaining 10% would go toward education, food assistance and administrative costs.
The proposition’s supporters estimate that it could raise approximately $100 billion over five years. However, the California Legislative Analyst’s Office (LAO), a nonpartisan fiscal and policy advisor, describes the expected revenue more cautiously, estimating that the measure would generate tens of billions of dollars spread over several years.
That difference is one reason the measure’s economic impact is more complicated than its campaign slogan suggests.
Vuong encouraged students trying to understand those effects to do their own research rather than relying on social-media posts. “It does require students to acquire the knowledge and be fully informed themselves of what that means economically, socially, future-wise for them, particularly living in a very high-net-wealth part of the country,” she said.
What supporters are saying
Prop. 40’s supporters have framed the measure primarily as a way to provide additional funding for health care, especially as California faces federal funding cuts under the Big Beautiful Bill. They argue that additional state revenue could help protect health care programs.
Vuong said the debate also reflects a broader concern about income inequality. She pointed to federal reductions in Medicaid funding and their potential consequences for California’s Medi-Cal system.
“Those cuts definitely came at a high cost for hospitals and clinics that closed, which affected thousands of people who needed those jobs. And it disproportionately affects access to patients … patients who are under-resourced, underserved communities of color.”
Why opponents are concerned
Opposition to Prop. 40 is largely based on its potential long-term effects.This one-time influx of revenue could come at the expense of future state income-tax revenue if wealthy Californians move elsewhere or change their financial behavior.
These behavioral changes are nearly impossible to predict, but LAO does identify three fiscal effects the proposition could have.
First, the funds only provide a temporary increase in revenue.
Second, the potential behavior changes in California’s wealthiest could result in a reduction of around less than $1 billion annually in ongoing income-tax revenue, according to their estimates.
Third, the administrative costs of determining and collecting the tax appropriately could cost tens of millions of dollars per year for several years.
Opponents also question whether California can accurately value assets such as private businesses, stocks, intellectual property and other property subject to the tax.
What does this mean for students?
For some college students, the effects of Prop. 40 may not be immediately obvious. Those relying on Medi-Cal, or planning careers in healthcare, education, or public service may be more susceptible to the broader consequences of changes to the state’s tax system.
That makes understanding the measure more complicated than determining whether a voter supports or opposes taxing billionaires.
Ultimately, Prop. 40 is only one of 14 statewide propositions Californians will vote on Nov. 3. The other measures address issues ranging from housing and taxes to voter identification, health care and environmental review.
So, as November approaches, students registered to vote should start doing their research, having conversations about what’s on the ballot, and generating an understanding of how it affects them. Every proposition on the ballot matters.
