California wealth tax (Prop 40): who would pay the one-time 5%

Proposition 40 is the California wealth tax on the November 3, 2026 ballot. It would charge the state's billionaires a one-time tax of 5% of their net worth. It is a proposal, not law, and counties began mailing ballots on October 5.

The date that decides who pays has already passed. The tax would reach people who were California residents on January 1, 2026, so moving out now would not avoid it. Unless your net worth is near $1 billion, it would not tax you.

Measure	Proposition 40, the 2026 Billionaire Tax Act
Who would pay	California residents on January 1, 2026 worth $1 billion or more
Rate	5% of total net worth, phased in between $1 billion and $1.1 billion
Net worth measured	December 31, 2026
Due	In 2027, or over five years at extra cost
Status on October 9, 2026	On the November 3 ballot, not law

What is California Proposition 40?

Proposition 40 is a ballot initiative for a one-time state tax on billionaires' net worth, for tax year 2026 only. Here is what it would do.

1. What it taxes. It would tax net worth: everything you and your spouse own worldwide, minus genuine debts, valued on December 31, 2026.
2. Who pays. It would apply to people who were California residents on January 1, 2026, under the income tax residency rules. Some trusts funded by a billionaire would pay too.
3. The rate. The tax would be 5% of total net worth, not only the part above $1 billion. The rate would phase in between $1 billion and $1.1 billion.
4. What is left out. Pensions and IRAs would be excluded, and Roth accounts up to $10 million in total. Real estate would be excluded only when held directly or through a revocable trust.
5. How it is paid. You would pay it with your 2026 California return, or in five yearly installments at extra cost.
6. What it does not do. It would not be a yearly tax, and it would not tax the act of leaving the state.
7. What could stop it. If Proposition 41 or 42 gets more yes votes, Prop 40 could be blocked.

One part would reach ordinary filers too. Each California resident who must file a 2026 return would declare net assets of $1 billion or less, or report the tax.

Who would pay California's billionaire tax?

People worth $1 billion or more on December 31, 2026 would pay it, if they were California residents on January 1, 2026. The Legislative Analyst's Office (LAO) says a few hundred people in the state have that much. A resident worth $2 billion would owe $100 million. One worth $1.05 billion would owe 2.5%, or $26.25 million.

A founder's company could not be valued below any funding round within two years of December 31, 2026. Only clear and convincing evidence that the round significantly overstates its value would change that.

Does the wealth tax apply if I moved out of California in 2026?

Yes, if you were a California resident on January 1, 2026 and your net worth reaches $1 billion. Prop 40 would assign 100% of the tax to California, whatever your residency history. Moving in during 2026 would not trigger it.

If you left in late 2025, the question is whether your residency really ended before January 1, 2026. The Franchise Tax Board (FTB) would apply its usual test: where your domicile and closest connections were. Prop 40 would give the FTB 10 years after the return is filed to propose more tax, instead of the usual four. See when California residency ends.

Is California Prop 40 a yearly tax?

No, Prop 40 would tax net worth once, for tax year 2026 only. Installments would spread that one bill over five years without adding years of tax. The Legislature could amend the act only by a two-thirds vote of each house.

When would the tax be due if it passes?

The tax would be due April 15, 2027, with the 2026 California income tax return. You could instead pay in five equal yearly installments starting in 2027. Each installment after the first would add a nondeductible charge of 7.5% of the unpaid balance.

Date	What happens
October 5, 2026	Counties begin mailing ballots
November 3, 2026	Election Day
December 11, 2026	The Secretary of State certifies the vote
December 31, 2026	Net worth is measured
April 15, 2027	Tax due, or the first of five installments
November 1, 2027	Target for the state Supreme Court to rule on any challenge

The court date is only a target, so the first payment could fall due before the courts finish.

What happens to Prop 40 if Prop 42 passes?

If Prop 42 gets more yes votes than Prop 40, Prop 40 could be stopped even with a majority, the LAO says. Prop 42 would ban new state taxes on owning financial assets and other personal property. It would also ban taxes based on residency on a date before the tax took effect.

Prop 41 could stop Prop 40 the same way. It would ban new state taxes whose revenue sits outside the state spending limit, as Prop 40's would. Each of the three has a clause saying it prevails over a conflicting measure that gets fewer yes votes.

What should you do now?

• Work from current law. California does not tax net worth, or the act of leaving, today.
• Do not move to avoid Prop 40. Residency on January 1, 2026 decides who would owe it.
• If you left California in late 2025, keep the records that show where you lived on January 1, 2026.
• If your net worth is near $1 billion, gifts over $1 million made after October 15, 2025 would still count toward it.
• We will update this page with the November 3 result.

For returns in more than one state, see our multi-state tax service. For the federal tax at death, see the estate tax exemption.

Sources.

• Proposition 40, text of the proposed law (California Secretary of State)
• Legislative Analyst's Office, analysis of Proposition 40
• Proposition 41, text of the proposed law
• Legislative Analyst's Office, analysis of Proposition 41
• Proposition 42, text of the proposed law
• Legislative Analyst's Office, analysis of Proposition 42
• California Secretary of State, qualified ballot measures
• California Secretary of State, key dates for the November 3, 2026 election
• Franchise Tax Board, personal income tax due dates