California Vote: Billionaires Spend $333 Million to Block One-Time Wealth Tax

Californians will vote this week on Proposition 40, a measure that would impose a one-time 5% tax on fortunes exceeding $1 billion. The proposal directs nine-tenths of the revenue toward the state’s Medicaid program. If approved, it marks a direct attempt to extract capital from the state’s wealthiest residents.

Silicon Valley billionaires have spent more than $333 million campaigning against the tax. Google co-founder Sergey Brin is among the donors warning that the levy will cause wealthy individuals to leave the state. These opponents argue the tax will backfire by reducing the capital available for investment and innovation.

The opposition is not the first time the wealthy have resisted new forms of taxation. In 1895, the Supreme Court struck down an income tax as unconstitutional. It took the 16th Amendment in 1913 to make the income tax standard. Proponents of Proposition 40 argue that wealth taxes may follow a similar path, becoming unremarkable within a decade.

Critics point out that the origins of modern tech wealth rely heavily on public research. The foundational technologies behind the iPhone, including the internet, GPS, and voice recognition, stem from federal funding. DARPA financed speech understanding research in the 1970s at Carnegie Mellon, MIT, and Stanford. Google’s search algorithm also grew out of a National Science Foundation project at Stanford.

SpaceX, which made Elon Musk a trillionaire when it began trading on the Nasdaq in June, received substantial federal support. The company took $396 million from NASA to develop the Falcon 9 and Dragon capsule. It later received $1.6 billion to fly cargo to the space station and $2.6 billion to fly astronauts. Musk also spent $366 million supporting Republican causes in the current election cycle.

The Department of Energy issued two similar loan guarantees in 2009, highlighting the risk profile of public backing. It provided $465 million to Tesla and $500 million to Solyndra. Solyndra collapsed two years later, leaving the taxpayer to absorb the loss. Tesla repaid its loan nine years early, causing government warrants to lapse. This structure socialized the risk while privatizing the reward.

Economists suggest that public money should come with specific terms, a concept known as pre-distribution. The CHIPS and Science Act attached conditions to $52.7 billion of semiconductor funding, specifying where plants would be built and what jobs they would create. Alaska has paid residents a dividend from oil revenue since 1982, demonstrating a model where the public holds a claim on value created by public resources.

Proposition 40 is not an alternative to these structural changes. It is a one-time levy collected decades after value was created. The measure addresses immediate needs in the state’s health system. The decision rests with voters who must weigh the immediate benefit of Medicaid funding against the long-term argument for restructuring how public investments are rewarded.