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California Proposition 40 would impose a one-time tax on certain billionaires and trusts tied to California residency on January 1, 2026. Under the Legislative Analyst’s Office (LAO) description, the tax would equal 5% of net worth and be due in 2027, with an option to pay over five years at a higher cost. It is a proposal, not an enacted tax: voters will decide it in the November 3, 2026 general election.
What Proposition 40 would do
The California Secretary of State’s 2026 Official Voter Information Guide describes a tax of up to 5% on taxpayers and trusts with covered assets valued over $1 billion. The LAO’s analysis describes the measure more simply as a one-time tax of 5% of net worth for people who were California residents on January 1, 2026 and met the billionaire threshold. Those summaries use different descriptions; the voter guide identifies covered assets and trusts, while the LAO explains the tax as a share of net worth.
The Secretary of State announced that the measure qualified for the ballot on June 17, 2026. As of October 4, 2026, voters have not decided whether it will become law. The guide’s summaries describe the proposal, not a tax currently due.
Who could owe the tax
California residency on January 1, 2026
The central date in the LAO analysis is January 1, 2026. A person who became a California resident after that date does not appear to meet the stated residency cutoff. Conversely, leaving California after that date would not, by itself, erase the cutoff. Applying the rule to a particular person’s circumstances would require a case-specific determination.
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Covered assets and trusts
The official summary refers to taxpayers and trusts with covered assets valued above $1 billion. It lists businesses, securities, art, collectibles, and intellectual property among covered categories. The LAO’s shorthand refers to billionaires and their net worth. The summaries do not establish a definitive outcome for every person, trust interest, or unusual asset, so crossing a general net-worth threshold alone is not enough to determine an individual’s liability from these summaries.
What property would be included or excluded
The voter guide says real property and some pensions and retirement accounts are excluded. The LAO likewise describes real estate, pensions, and retirement accounts as generally excluded. “Some” and “generally” matter: the summaries do not establish that every pension or retirement account is exempt or resolve how every asset would be treated. The initiative’s text and any implementation rules would matter for asset-specific questions.
When and how payment would work
- Determine whether the proposal applies. The described test centers on California residency on January 1, 2026, the covered-asset threshold, and the taxpayer or trust involved.
- Calculate the proposed tax. The LAO describes a one-time charge equal to 5% of net worth for covered billionaires.
- Pay in 2027 or elect installments. The LAO says payment would be due in 2027. Taxpayers could spread payment over five years, but at a higher cost; the cited summary does not specify the precise added amount.
This is a description of the proposal and not individualized tax advice or a current payment instruction.
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Where the revenue would go
The measure would allocate 90% of revenue to health care services and 10% to food assistance or education-related programs. The Attorney General-prepared summary says the revenue could not replace existing funding for those purposes. It also describes exemptions from constitutional requirements concerning school funding, budget reserves, and the state spending limit.
What the state’s fiscal analysis estimates
The LAO’s 2026 voter-guide analysis says California probably would collect tens of billions of dollars over several years, but cautions that the amount and timing are difficult to predict. As the office puts it, “Exactly when and how much the state would collect is very hard to predict for many reasons.” Taxpayer responses and changing values of stock-based wealth contribute to that uncertainty.
The same analysis identifies two other fiscal effects:
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- Possible ongoing income-tax decrease: The state could collect less than $1 billion per year in income taxes from billionaires. This is a possible indirect effect, not a guaranteed loss.
- Administration costs: The state could incur costs of tens of millions of dollars per year for several years to administer the measure.
The one-time wealth-tax receipts and a possible recurring income-tax decrease are different effects and should not be treated as comparable annual figures.
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What remains unresolved
The official summaries do not decide how courts would rule on possible legal challenges or how administrators would value every privately held or unusual asset. They also do not settle how residency or trust interests would be determined in a specific case. Those questions cannot be answered reliably with a general description of the ballot measure.
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