California voters decide today whether to approve Proposition 40, a one-time tax of up to 5 percent on covered billionaires’ wealth, with most revenue supporting health care. Residency would be determined as of January 1, 2026, and wealth valued as of December 31—meaning moving before the election would not automatically eliminate liability.
The proposal raises several broader problems:
Determining part-time residency and allocating worldwide wealth.
Challenging the retroactive residency date and the tax’s legal classification.
Valuing private businesses and financing payments from illiquid holdings.
Accounting for migration, administrative costs, and uncertain revenue.
Holland & Knight’s analysis examines these issues in greater detail.
Recent polls suggest opposition has gained ground, but differences among surveys and uncertainty about turnout leave me reluctant to predict the outcome.
Proposition 41 would prohibit new taxes exempted from California’s spending limit, while Proposition 42 would prohibit new personal-property taxes and restrict retroactive taxation. Either could block Proposition 40 if it also passes and receives more Yes votes, subject to judicial resolution.
Two Possible Ramifications
Technology stocks: Passage could add selling pressure as affected investors raise cash, while uncertainty could compound an existing correction. California’s count could take weeks to resolve a close result; certification is due December 11, and litigation could extend uncertainty further.
IPOs: Uncertain liabilities, litigation, and valuation disputes could lead companies to postpone offerings or abandon current plans. Going public establishes a market price for founder holdings, not something I would want to do if I was potentially subject to the tax.
If the vote is close, even the result could remain unknown for weeks, prolonging the uncertainty.