Proposition 40 could raise tens of billions for health care, but the hardest questions are how California would value private fortunes and what happens after the one-time money is gone.
For the tax
California's Legislative Analyst's Office says the levy would probably raise tens of billions of dollars over several years from a few hundred people. Ninety percent must go to public health care, with the rest for education, food assistance and administration. Supporters argue that asking people with extraordinary ability to pay is preferable to cutting Medi-Cal or shifting the bill to ordinary taxpayers.
Because it is a one-time levy on wealth already accumulated, it does not permanently raise the tax on future investment returns. The OECD says a surprise capital levy can therefore be less economically distortive in theory, although successful examples are rare. The Jan. 1 residency rule also means moving later in 2026 would not erase the bill.
Against the tax
California does not already receive a clean net-worth figure on income-tax returns. Public stock is easy to price; private companies, trusts and intellectual property are not. The measure would invite long disputes over ownership, debt, control and fair value, while giving the Franchise Tax Board broad rulemaking and enforcement authority.
A billionaire on paper may not have $50 million in cash for every $1 billion of wealth, making sales or long deferrals more likely. The money is also temporary while health-care costs recur. The LAO expects departures and other responses could reduce ongoing income-tax revenue by less than $1 billion a year, so California would trade a large, uncertain windfall now for some risk to a highly concentrated future tax base.