California is asking voters to consider a tax on wealth rather than annual income. Proposition 40 would impose a one-time tax equal to 5% on certain people worth more than $1 billion who were California residents on January 1, 2026.

The tax would be due in 2027, with an option to pay over five years at additional cost. Real estate and certain retirement assets would generally be excluded. This is not a 5% tax on everyone's paycheck.

Where Would the Money Go?

Ninety percent would go toward public health care services. The remainder would support education, food assistance and tax administration. The revenue could not simply replace existing funding for those purposes.

The tax proceeds would be exempt from some existing constitutional rules governing school funding, state reserves and spending limits.

How Much Would California Collect?

The Legislative Analyst expects tens of billions of dollars over several years, but the precise amount is difficult to predict. Asset values change, and taxpayers might alter their finances or residency.

The analyst also identifies a possible ongoing decline in state income-tax revenue of less than $1 billion per year if some billionaires leave or otherwise reduce their taxable income.

Why the Disagreement?

Supporters say the one-time tax would raise money for essential health services from people with very large fortunes. Opponents question its effects on investment, business activity and future tax revenue.

The outcome would depend on behavior and market conditions, not just the percentage printed on the ballot.

What Does Yes or No Mean?

Yes would create the one-time wealth tax and spending rules. No would reject this new tax.

Questions You May Have About Proposition 40

Is it an annual tax?

No. It is designed as a one-time tax.

Does it apply to ordinary homeowners?

It targets certain taxpayers with covered net worth above $1 billion.

Is all the money for health care?

Ninety percent is allocated to health care; the rest has other specified uses.

Is the revenue guaranteed?

No. The state estimates tens of billions, but the total is uncertain.

Official sources: California Secretary of State, Proposition 40 voter guide and Legislative Analyst’s analysis. Informational coverage, not an endorsement.