California's proposed one-time 5% wealth tax on residents with net worth exceeding $1 billion has already triggered an outflow of wealthy individuals and capital from the state, despite remaining unpassed and facing a November ballot vote.

The measure, Proposition 40, also known as the “Billionaire Tax,” is backed by the Service Employees International Union-United Healthcare Workers West and prominent U.S. Senator Bernie Sanders. It qualified for the November 3, 2026, ballot after collecting sufficient signatures and would apply retroactively to those living in California on January 1, 2026, with revenue earmarked primarily for healthcare.

SEIU-UHW argues the federal funding cuts will strip roughly $100 billion from California healthcare over the next five years, leading to:

  • About 145,000 healthcare jobs disappearing
  • Insurance premiums rising, and an estimated 3.4 million Californians losing coverage altogether.
  • Hospitals, clinics, nursing homes, and home care will be forced to reduce services or close down.

If passed, 90% of the revenue generated would go toward healthcare for low-income Californians, and 10% toward education and food assistance programs.

Opponents, including Governor Gavin Newsom, argued that the initiative would harm the state's economy by encouraging further departures. Newsom and allied groups attempted to broker a compromise to remove it from the ballot before the June 25 deadline but failed.

Evidence of preemptive exits emerged quickly after the proposal gained traction. Google co-founder Sergey Brin relocated his primary residence to Nevada and directed over $90 million into opposition efforts. Other billionaires followed similar paths, with reports indicating a collective exodus of individuals holding between $700 billion and $1 trillion in wealth.

Vocal critic of this measure, entrepreneur Mark Cuban, got into a heated exchange with California Rep. Ro Khanna over X.

Cuban said a tax measure revealed the economic ignorance that makes U.S. wealth taxes so tempting to politicians.

“If this passes, and it doesn’t directly impact me at all, I won’t be a Cali resident, but you can bet if I’m investing in a multi-billion-dollar startup, I’m asking them to move from California first,” said Cuban.

Khanna suggests that the founder could sell shares to pay the tax. But that would effectively force an entrepreneur to give up a large portion of his company because a financing round has placed a high valuation on it before it has fulfilled its potential.

Early polling showed divided support, with historical trends suggesting ballot measures starting near or below 50% often struggle.

As of mid-August 2026, the measure remains on the ballot as Proposition 40, setting the stage for a costly campaign ahead of the election.