By admin 
California voters will see a slew of tax measures on their ballots this November. Two propositions target wealthy Californians, but they have very different goals, targets and sponsors.
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The difference between Prop. 3 and Prop. 40
In broad strokes, Proposition 3 would cement an existing tax on high-earners to fund public schools and community colleges. The tax applies to the top 2% of Californian taxpayers: income over $371,000 for single filers or $742,000 for joint filers, adjusted annually for inflation.
Because the tax is already in place, the only change instituted by Prop. 3 would be to make it permanent rather than letting it expire in 2031. Backers say that if the tax were to sunset, the education system would face at least a $10 billion annual shortfall. They warn that it would cause school closures, teacher layoffs, and overcrowded classrooms.
In contrast, Prop. 40 — better known as the billionaire tax — would apply to people who were residents of California as of Jan. 1, 2026, and whose assets exceed $1 billion. Unlike Prop. 3, which taxes annual income, Prop. 40 is a new-to-California proposal that would tax billionaires’ accumulated wealth.
The new tax would create a one-time, 5% levy on those Californians’ wealth. Ninety percent of the revenue generated would go to buttressing California’s healthcare system, which faces sharp federal cuts under a Medicaid overhaul signed by President Donald Trump last year. Supporters say without the tax, hospitals will close or cut services and patients will die.
Who is supporting and opposing the taxes
The Prop. 40 billionaire tax is arguably this year’s most divisive ballot measure. Its sponsor is SEIU-United Healthcare Workers West and its backers include Sen. Bernie Sanders, I-Vt., and Rep. Ro Khanna, D-Fremont. Prop. 40 has been endorsed by the California Democratic Party and the Labor Federation of California.
The measure has united critics ranging from business groups like the California Business Roundtable, prominent politicians like Gov. Gavin Newsom, and traditionally left-leaning groups like the California Teachers Association and Planned Parenthood Affiliates of California. They’ve argued the measure amounts to high stakes, half-baked policy and that will jeopardize future tax revenues if billionaires decide to flee the state.
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Prop. 3, sometimes called the millionaire tax, hasn’t generated the same well-funded opposition as Prop. 40. It’s backed by a broad range of groups, including the CTA, Planned Parenthood and California Democrats. While a few business and tax groups have come out against it, including the Howard Jarvis Taxpayers Association and Central Valley Business Federation, bigger business groups have stayed on the sidelines.
Prop. 3’s critics say the original tax was meant as a temporary response to the Great Recession, not permanent policy. They argue that policymakers should focus instead on curtailing what they view as out-of-control state spending.
How will the propositions affect state finances?
The nonpartisan Legislative Analysts Office reviews every proposed ballot measures’ impact on the state’s finances.
It found that Prop. 3 will continue to bring in $5 billion to $15 billion per year. The number fluctuates because it is closely tied to the performance of the stock market.
The LAO is significantly less certain about the effects of the Prop. 40 billionaire tax. It found the state would probably collect tens of billions of dollars from the tax. But the uncertainties surrounding the tax — including how billionaires might reduce their tax liability or declare residency elsewhere — as well as fluctuating stock prices make it hard to pin down a more precise number.
It’s also unclear what long-term effects the tax might have on California revenues. If many billionaires left the state for good, that could endanger future state tax collections by hundreds of millions of dollars or more, according to the LAO.
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