Daniel Wolfram
Silicon Valley billionaires outspent labor groups to bury the measure and block future levies.
There is no doubt that the Democratic Party had one of the greatest nights in modern American political history.
That is also true for California—the largest economy in the US and one of the largest in the world. A Democratic socialist was even elected as the new mayor of Los Angeles.
However, some of the giant tech companies still managed to get a milestone victory as they narrowly avoided paying more in taxes.
An internal divide within the Democratic Party
Voters in California have shot down Proposition 40. According to a race call by the Associated Press, the landmark ballot proposal to create the country’s first net-worth tax on billionaires has officially failed after a bitter campaign. Nearly 53 percent voted no.
The defeat exposed a sharp rift among high-profile Democrats. Governor Gavin Newsom actively opposed the initiative, warning that wealthy residents would flee. While Newsom called the focus on inequality ‘spot-on,’ he insisted that a state-level wealth tax would ultimately harm California.
Socialist Senator Bernie Sanders fundamentally disagreed, and he fired back on social media, declaring that “our nation will not thrive when so few own so much.”
Ironically, money became a big part of why the proposition failed. Opponents of Proposition 40 lobbied and raised over $333 million to bury the initiative, crushing labor supporters under an enormous tenfold spending advantage. Google co-founder Sergey Brin alone poured in more than $100 million.
The billionaire exodus
The proposition sought a one-time five percent levy on mega-fortunes to fund healthcare, with labor backers projecting roughly $100 billion in revenue. Yet independent state analysts warned that departures could spark a “possible ongoing decrease of less than $1 billion per year” in regular tax revenue.
Tech titans were already heading for the exits. Both Brin and fellow Google founder Larry Page began moving before the residency deadline.
A UC Berkeley poll reported by Newsweek declared the proposition a toss-up before voting started. However, on Election Day, voters not only rejected Proposition 40, but also backed a companion initiative to ban future asset taxes in the state constitution.
Union leaders refused to treat the loss as the end of the billionaire tax. Labor official Lorena Gonzalez insisted the bruising battle succeeded in “showing other states that you can look them in the eye.”
