Proposition 40 Billionaire Tax Divides California Unions and Economists Ahead of Nov. 3 Vote

With one week remaining before the Nov. 3 election, Proposition 40 — a ballot measure that would levy a one-time 5% tax on the net worth of California's roughly 200 billionaires — has ignited a public clash among economists over its fiscal impact and opened a rift between local labor unions in San Francisco and Los Angeles and their statewide leadership in Sacramento.

Proposed by SEIU-United Healthcare Workers West (SEIU-UHW) to help fund healthcare programs including Medi-Cal, Proposition 40 holds a narrow lead in a recent Citrin-POLITICO poll, with 46% of likely voters in favor and 43% opposed.

Economists Clash Over Revenue Estimates and Departure Risk

Proponents of Proposition 40 cite an expert report co-authored by economists Emmanuel Saez and David Gamage — alongside work by UC Berkeley economist Gabriel Zucman — projecting that the one-time 5% levy on billionaire assets, including stock holdings, would generate roughly $100 billion over five years.

Because tax eligibility under the measure is tied to California residency as of Jan. 1, 2026, Zucman has argued that billionaires cannot avoid the levy by relocating now.

"There is no incentive to move to another state. One cannot avoid the tax by moving. This is one of the main reasons why it was structured as a one-time tax," Zucman stated.

However, a working paper by Stanford University Hoover Institution economist Ben Jaros and Hoover senior fellow Joshua Rauh — presented at a National Bureau of Economic Research conference on Sept. 17 — estimates that Prop. 40 would raise about $30 billion up front (within a range of $28 billion to $36 billion) while costing the state an average net loss of roughly $39 billion in present-value dollars due to ongoing income tax losses from billionaires leaving California.

Using a "litigation risk framework" that simulates 100,000 legal and behavioral outcomes, Jaros and Rauh model realized revenue ranging from $0 if courts invalidate the tax to $72 billion if the state prevails in all legal challenges against remaining residents, assuming the state collects half of the roughly $59 billion left after departures. Jaros argued that billionaires weigh whether the Legislature could pass future net-asset taxes by a two-thirds vote.

Meanwhile, California's nonpartisan Legislative Analyst's Office (LAO) has estimated that Prop. 40 would bring in "tens of billions" of dollars in one-time revenue while reducing ongoing state income tax revenues by "under $1 billion a year," without issuing a single net figure.

Local Teachers and Building Trades Unions Break With State Leaders

Inside organized labor, Proposition 40 has pitted major local unions in the Bay Area and Southern California against statewide union leadership that joined Gov. Gavin Newsom in opposing the measure.

At the statewide level, the California Teachers Association (CTA) and the State Building and Construction Trades Council oppose Prop. 40, alongside statewide firefighter and domestic worker unions. In a June statement, the CTA said its state council concluded the measure "will not provide the sustainable and long-lasting funding that our schools and communities deserve," while prioritizing Proposition 3 — a separate November ballot measure to permanently extend existing tax rates on top-income earners.

California Building Trades President Chris Hannan also defended the statewide opposition, saying the union worries billionaire departures could erode long-term state revenues that fund school and infrastructure construction.

However, several major local affiliates have broken with their state organizations to endorse Proposition 40:

• United Educators of San Francisco (UESF), representing about 6,500 teachers and staff, voted unanimously among its leadership to endorse Prop. 40. UESF political organizer Alex Schmaus called the CTA's opposition "an error."
• United Teachers Los Angeles (UTLA), representing roughly 35,000 teachers and staff, also defied the CTA to endorse the measure.
• Sheet Metal Workers' Local 104, representing about 10,000 members across the Bay Area and Northern California, and the San Diego Building Trades Council (over 35,000 construction workers) broke with the state Building Trades to endorse Prop. 40.

At the statewide level, the California Labor Federation (led by Lorena Gonzalez), the California Federation of Teachers, the California Nurses Association, and the National Union of Healthcare Workers have all endorsed Proposition 40.