40

Why Thrive LA opposes 40

Proposition 40 would impose a one-time 5% tax on California taxpayers with assets exceeding $1 billion, directing the revenue primarily toward health care programs. It would also exempt that revenue from constitutional requirements for school funding and from the state spending limit. This is a wealth tax, and wealth taxes fail everywhere they are tried. France, Sweden, and Norway all abandoned or scaled back their wealth taxes after watching capital flee and revenues disappoint. California would be no different. The state's billionaires hold assets that are mobile: stocks, business interests, venture capital. A 5% levy on those holdings does not sit passively on a balance sheet. It triggers liquidation, relocation, and restructuring. The result is not tens of billions in new revenue. It is tens of billions in economic disruption, followed by a permanent reduction in income tax receipts as high-net-worth residents redomicile to states that do not tax wealth. The measure's own fiscal analysis concedes the point, projecting a possible ongoing decrease of nearly $1 billion per year in income tax revenue from billionaires. That is the state's own estimate of capital flight baked into the optimistic scenario. The pessimistic scenario is worse: once a constitutional mechanism for taxing wealth exists, the threshold drops. Today it is $1 billion. Tomorrow it is $100 million, then $10 million. Every small business owner, property holder, and retirement saver in California should understand that this measure establishes the legal architecture to tax accumulated savings at any level the legislature later chooses. Exempting the revenue from school funding formulas and the state spending limit is a further red flag. Proposition 98 and the Gann Limit exist precisely to prevent Sacramento from collecting unlimited revenue and spending it without accountability. Proposition 40 carves out an exception to both guardrails, creating a pool of money that politicians can direct with minimal constraint. Health care is a sympathetic label, but unaccountable spending is unaccountable spending regardless of the line item. Vote No on Proposition 40. It is a wealth tax that will drive capital out of California, shrink the tax base, and establish a dangerous precedent for taxing savings at every income level.