California’s ultra-wealthy tech executives appear on the verge of defeating a state wealth tax, but their tax battles are far from finished. While election officials continue counting ballots, early returns show 56% of California voters rejecting Proposition 40, compared to 44% in favour. As the ballot measure requires a simple majority to pass, election analysts say defeat is virtually assured, as per a report by CNBC. The measure sought to impose a one-time 5% levy on the net worth of California residents holding more than $1 billion in assets.While Silicon Valley billionaires breathe a sigh of relief at home, tax experts warn that the state-level fight could catalyse a much broader push in Washington, where newly empowered Democrats in Congress are eyeing federal tax increases on top earners and a potential federal wealth tax, the report added.
Countermeasures seal Prop 40’s fate
The billionaire tax ran into direct opposition from two competing ballot measures designed as legislative countermeasures.Proposition 41: Restricts how state tax revenue can be spent.Proposition 42: Explicitly prohibits the state from taxing personal assets.Both countermeasures are currently winning majority support among voters. Under California election rules, if either proposition receives more total votes than Proposition 40, the billionaire tax is officially nullified, the report added.Faced with the mounting deficit, the proposal’s primary backer conceded defeat with the healthcare union Service Employees International Union-United Healthcare Workers West (SEIU-UHW West) announcing plans to reintroduce the initiative in 2028 unless state lawmakers intervene to “make billionaires pay their fair share.”
Mixed results for wealth taxes across other US states
While California voters rejected taxing accumulated net worth, measures aimed at taxing high-income earners saw stronger momentum elsewhere. In Washington State, voters approved a new “millionaire tax,” establishing a 9.9% tax rate on household income exceeding $1 million per year.In Colorado, a ballot measure seeking to replace the state’s 4.4% flat tax with a graduated income tax, featuring an 8.4% top bracket on earnings above $1 million, remains too close to call.
Federal scrutiny awaits in Democrat controlled Congress
With Democrats now positioned to take control of both the US House of Representatives and the Senate, tax policy analysts anticipate a wave of federal legislation designed to increase levies on wealthy individuals and corporations to fund middle-class relief.“It is clear Democrats will try to lower taxes for middle-income households and raise taxes on certain businesses and high-income households. But it is much too soon to know how,” said Howard Gleckman, nonresident fellow at the Tax Policy Center, as per CNBC.Federal lawmakers could revive legislative frameworks introduced during the last congressional cycle by Democratic Senators Chris Van Hollen of Maryland and Cory Booker of New Jersey. Van Hollen’s proposal introduces a graduated surtax on incomes surpassing $1 million:$1 Million to $2 Million: A 5% surtax.Over $5 Million: A 12% surtax.Top Marginal Income Rate: Would rise to 49%, up from the current 37% federal ceiling.Capital Gains: The top long-term capital gains tax rate would jump from 23.8% to 35.8%.To counterbalance the tax hikes, the plan proposes expanding exemptions for middle- and lower-income filers, creating a $46,000 deduction for single tax filers and a $92,000 deduction for joint filers.