Six Nobel Prize-winning economists endorsed California's Proposition 40 on September 19, backing a measure that would place a one-time 5% tax on the wealth of the state's billionaires. According to reports from Fortune, the letter came from Daron Acemoglu, Abhijit Banerjee, Peter Diamond, Esther Duflo, Paul Krugman, and Joseph Stiglitz, all holding the Nobel Prize in Economic Sciences. The economists argued that California's wealthiest 0.001% population, who held $700 billion ten years ago, now control $2.3 trillion, matching the annual income of roughly 20 million California taxpayers. As reported by Reuters, University of California, Berkeley economics professor Emmanuel Saez, a researcher of wealth inequality who helped write Proposition 40, describes the proposal as very simply "a tax on billionaires to fund healthcare."
Recent polling data reveals mixed support for the billionaire tax initiative, with 48% of likely voters supporting Proposition 40 and 41% opposed according to a UC Berkeley IGS Poll in August. However, a September Public Policy Institute of California poll showed the measure leading 52% to 46%, though political analysts warn this represents a concerning trend. As reported by Reuters, John Pitney, a professor of politics at Claremont McKenna College, noted that "California ballot measures tend to lose support over time, and if it's polling below 50% in August, that's not a good sign for its prospects." The measure requires robust early support to survive Election Day, as undecided voters are more likely to vote against tax increases when the time comes.
The measure faces significant opposition from the wealthy individuals it would affect, with Sergey Brin, the Google co-founder, spending more than $100 million to defeat Proposition 40 and support countermeasures that would effectively void it. According to Reuters, Brin, 53, whose family fled the Soviet Union when he was a child, told the New York Times "I fled socialism with my family in 1979 and know the devastating, oppressive society it created in the Soviet Union. I don't want California to end up in the same place." Ripple Labs executive chair Chris Larsen has spent more than $10 million to defeat Proposition 40, with Golden State Promise receiving $5 million from Larsen and Ripple Labs matching that contribution. Venture capitalist John Doerr contributed $7.5 million to the same committee, while Forbes currently values Larsen at $8.4 billion, which would leave him facing roughly $420 million under a 5% levy.
The economists calculated that billionaires paid state income tax equal to 1.6% of their $1.4 trillion wealth gain between 2019 and 2025, arguing that ordinary paychecks face higher effective rates than this. As reported by Fortune, they stated that a one-time tax of 5% on California's 250 billionaires would raise approximately $100 billion, equivalent to a 5% income tax on all Californian taxpayers. However, skeptics peg the revenue estimate at closer to $40 billion and warn it could drive some billionaires out of state, depriving California of future tax revenue and investment. The tax is retroactive to January 1, limiting billionaires' ability to escape by moving, though Saez believes it unlikely to prompt mass migration due to California's universities, research infrastructure, and talent.
California's billionaire tax initiative reflects a growing national debate about taxing the ultra-wealthy, with 64% of independent registered voters in a Reuters/Ipsos poll supporting increased taxes on corporations and billionaires compared to 15% who oppose the idea. According to Reuters, New York City Mayor Zohran Mamdani successfully campaigned to tax high-end second homes, and even a majority of Republicans see billionaires as creating unfairness and contributing to economic woes. Governor Gavin Newsom, a Democrat widely believed to be running for president in 2028, also opposes Proposition 40, instead advocating for a nationwide federal wealth tax. The California proposition is part of a broader trend, as European countries including France, Sweden, Finland, Denmark and Germany repealed wealth taxes between 1997 and 2018 amid concerns about capital flight and economic competitiveness.
