The billionaire tax that wasn’t

TL;DR: What do tech billionaires, construction workers, and a Democratic governor have in common? They were all against California’s billionaire tax, and they won. Last week, voters rejected Prop 40, a one-time 5% levy on the state’s richest residents that looked simple on paper—in the first big test of a wealth tax, right on tech’s home turf.

What happened: The tax would’ve applied to anyone worth at least $1 billion who lived in California at the start of the year (about 200 to 300 people), and tech would’ve footed much of the bill. Unlike most taxes, it was targeted at wealth instead of income, which matters because most billionaires’ fortunes are tied up in stock (for reference, Mark Zuckerberg’s base salary at Meta is $1).

On paper: A healthcare workers union pitched the measure as a way to make up for federal cuts that are expected to leave about 2 million Californians without health insurance. Supporters say the tax would’ve generated about $100 billion in revenue for the state, with 90% slated for a healthcare fund and the rest for education and food assistance. As the AI boom sent billionaire fortunes soaring, supporters argued, they could easily afford a one-time hit.

Reality check: So how does a tax on a few hundred billionaires lose in California? For one, the people campaigning against it had a far larger war chest and outspent its supporters roughly tenfold ($378 million to $32 million). Google co-founder Sergey Brin led the charge with more than $100 million alone and was joined by fellow tech heavyweights, including Eric Schmidt and Peter Thiel.

The logic against the tax is a tale as old as time: If billionaires leave (which many threatened to do if the tax went into effect), the companies they founded and the jobs they create could go with them. When Zuckerberg floated leaving, Meta created a whole new class of shares he could sell to cover the tax (most of us can’t even expense lunch). And the argument won over an unlikely coalition, including Gov. Gavin Newsom, construction unions, and the state’s largest teachers union. Others objected to how the measure was written, arguing there was no guarantee the money would boost healthcare or help in other areas.

Bottom line: There could be a rematch in 2028, but it now faces a new hurdle: Prop 42, a countermeasure that would ban new state taxes on assets like stocks and business stakes—which is on track to pass. Tech companies can, for now, cancel their U-Hauls and go back to building robots to drive them. —LC